U.S. Department of Education Secretary Arne Duncan on Wednesday received a letter from 11 state Attorneys General expressing concerns about information provided by the department to students affected by the sudden closure of 28 colleges operated by Corinthian Colleges Inc.  

The letter urges the Education Department to provide debt relief to students who do not qualify for a "closed school" discharge but were harmed by misconduct by the school.  The letter asserts that such students should be permitted to raise Corinthian’s misconduct as a defense to repayment of their student loans.  The letter further urges the Education Department to provide clear guidance to students on how to assert a claim for relief.

The letter expresses concerns that a list of transfer options offered to students by the department includes some colleges that are under investigation by federal and state agencies.  The list of transfer options includes schools identified by the department as having possible financial problems, according to the letter, which asks that those schools be removed from the list. 

The letter was co-signed by the Attorneys General of Connecticut, Hawaii, Illinois, Kentucky, Maine, Maryland, Minnesota, Missouri, New Mexico, New York and Oregon.

Corinthian Colleges was a for-profit chain of colleges that came under scrutiny in 2014 for leaving students with unsustainable debt levels and lackluster job prospects. Corinthian's network of for-profit schools once included 100 campuses across the U.S., where about 74,000 students were enrolled. 

In February, the government struck a deal with ECMC Group, allowing the student debt guarantor to acquire some of Corinthian's campuses. ECMC agreed to wipe out $480 million in debt to avoid any liability for Corinthian's alleged illegal activity. Collections & Credit Risk first reported about a possible deal in November 2014.

Corinthian then announced in April the closing of its remaining 28 campuses effective Monday. The closing marked a quick end to what had been a steady dismantling of one of the country’s largest for-profit schools. It impacted approximately 16,000 students nationwide. 

The April closures included 13 Everest and WyoTech campuses in California, Everest College Phoenix and Everest Online Tempe in Arizona, the Everest Institute in New York and Heald College, along with its 10 satellite campuses across the U.S., according to a notice on the organization's website.   The following information was provided to former Corinthian students by the Education Department. Federal Loan Discharge (Forgiveness)

  • You may qualify for a "closed-school" discharge of your federal loans. To be eligible, you must be either:
    • enrolled on the date that the school closed;
    • on an approved leave of absence on the date the school closed; or
    • in most cases, have withdrawn from the school within 120 days of the school’s closure. If you withdrew more than 120 days prior to the closure, you may also be eligible if the U.S. Department of Education determines that "exceptional circumstances" apply, such as the violation of state or federal law by the school. The department has not yet indicated whether an "exceptional circumstances" exemption will apply to Corinthian students.
  • How to obtain a federal "closed school" loan discharge:
    • Loan discharges are not provided automatically. You must submit an application to your federal loan servicer. 
    • If you do not know who your servicer is, call 1-800-4-FED-AID or log in to My Federal Student Aid
    • Some servicers make "closed-school" discharge applications available on their websites. If yours does not, call to request an application.
  • Parent PLUS loans may also be eligible for "closed-school" discharges.
  • You will not be eligible for a "closed school" discharge if you choose to transfer credits to another school and complete your program of study. 
  • If you graduated or withdrew more than 120 days before the school’s closing, and so you do not qualify for a "closed school" discharge, you may be able to assert a defense against repayment of your federal loans if your school violated state law and certain other eligibility requirements are met.  The Department is expected to provide additional information in the near future about how students can assert defenses to repayment based on a school’s violation of state law. 

 


 

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