Slow-Paced Forgiveness: Feds Erase $28M in Debt of Defrauded For-Profit College Students

Nearly $28 million in federal student loans for 1,312 former Corinthian Colleges students will be forgiven in a second wave of erasing debt for former students of defunct for-profit chain Corinthian College.

These students fall into the category of claiming that the for-profit chain violated their rights.
The announcement this week by the U.S. Education Department marks a milestone of sorts — the first big step toward resolving thousands of “defense-to-repayment” claims. Under a seldom-used provision in federal law, college students have the right to petition the government to discharge federal loans on the grounds that a school used illegal or deceptive tactics in violation of state law to persuade students to borrow.
However, borrower advocates say the Education Department is still taking too long to process these claims. Meanwhile, lawmakers have their own concerns about losing billions of dollars in taxpayer money — although the debt forgiveness announcement this week only affects 1 percent of the estimated 125,000 student debtors who are eligible for cancellation of student loans.
In September, the Education Department said it had received 4,140 claims for student loan discharge since it announced in June that the government would provide relief for students who attended (after June 20, 2014) the 30 Corinthian campuses that closed in April. Those loan-discharge reviews are take a long time to process in part because the Education Department has to analyze state laws for each claim.
Nearly 7,000 former students of Corinthian College will have their loan debt erased by the federal government. The total $103 million is only a fraction of the billions of dollars that Wyotech, Heald College and Everest University charged in tuition as part of the for-profit chain.
Senators Dick Durbin of Illinois and Richard Blumenthal of Connecticut called the Department’s decision to erase the $28 million in debt “progress for students.”
“The Department of Education’s approval of relief today is welcome news for some 1,300 former Heald students, but there are thousands more across the country who deserve the same relief,” the senators wrote in a letter. “We encourage the Department to step up the pace and scope of its Corinthian debt relief efforts to give those students the relief they deserve under the law now.”

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