Anyone who borrowed money to attend a school owned by Corinthian Colleges – a for-profit institution with a long history of defrauding students before its sudden closure in 2015 – will have their federal student loans canceled.
The mass discharge is the largest amount of debt the federal government has erased in one action benefitting more than a half million borrowers to the tune of $5.8 billion.
“While our actions today will relieve Corinthian Colleges’ victims of their burdens, the Department of Education is actively ramping up oversight to better protect today’s students from tactics and make sure that for-profit institutions – and the corporations that own them – never again get away with such abuse,” said Education Secretary Miguel Cardona.
Corinthian Colleges opened in 1995. Based in California with campuses nationally, the colleges closed in 2015 after the Education Department cut off the for-profit institution’s ability to access federal money. But borrowers who had attended the college sometimes still struggled to get their loans discharged.
The cancellation of the Corinthian College debt also comes as the President Biden considers wider student loan forgiveness, and payments on federal student loans remain frozen. That pause is set to lift at the end of August.
About 41 million borrowers benefit from the pause, and the Education Department has estimated it saves them about $5 billion a month.
Vice President Kamala Harris is expected to formally announce the debt cancellation on Thursday at the Education Department. She has a history with Corinthian Colleges.
As California’s state attorney general, Harris secured a judgement against the institution in 2016 that resulted in $1.1 billion in relief for former students. The original complaint, filed in 2013, alleged the school targeted poor Californians via ads and marketing campaigns that misrepresented the likelihood of students finding jobs.
The Education Department estimated that roughly 560,000 borrowers would be benefit from the cancellation to the tune of nearly $6 billion . The cancellation comes via the borrower defense program, a federal initiative that cancels the debt of students who can prove they were defrauded by their schools.
Borrowers with debt associated from Corinthian Colleges will not have to apply for the relief. And in some cases, they will receive refunds for payments they had already made.
The agency has previously announced changes to existing debt relief programs that the department says has resulted in $18.5 billion for roughly 750,000 borrowers. The most wide-reaching revamp was of the Public Service Loan Forgiveness program, which has benefitted nearly 113,000 borrowers.
Borrower advocates praised the news, but questioned if the department would cancel debts at other closed for-profit colleges.
“This action is long overdue, but we hope it provides these borrowers with a fresh start and an opportunity to chart a path towards a brighter, more secure financial future,” said Libby DeBlasio Webster, senior counsel for the National Student Legal Defense Network, a borrower’s advocate group. “We also hope today’s news is a sign that other decisions are on the horizon for thousands of similarly situated students who are waiting for this kind of relief.”
The Debt Collective, a national group of organizers working toward student debt forgiveness, also praised the announcement. That group had also led a “student debt strike” in 2015 made up of former students from Corinthian College who said their degrees were fraudulent.
Thomas Gokey, a member of the Debt Collective, said the borrower to defense rule was relatively unknown until members of the group started applying for relief from the Education Department.
One of the members of the original debt strikers – the group calls them the Corinthian 15 –Latonya Suggs, said on a press call Wednesday afternoon that she was encouraged by the cancellation, but wished it covered all borrowers.
“I am happy at the end of the day that our loans are being discharged, but the battle is not over,” Suggs said. “There’s way more that we have to do. And at the end of the day, it took way too long.”