As college grads wait and see if President Joe Biden will pay off some of their student loan debt, his administration is taking a more limited step to address a cheating scandal at Corinthian Colleges, a for-profit chain that collapsed nearly a decade ago.
Anyone enrolled in the company’s schools will have paid off his or her federal student debt, clearing $5.8 billion for more than 560,000 borrowers — the largest single loan relief of all time, according to the Department of Education.
Vice President Kamala Harris on Thursday called it a milestone on “a road to justice for all who have been cheated” and will “put real money in real people’s pockets.” She briefly referred to ongoing questions about next steps. Student loan debt “As a nation, we still have a lot to deal with on these issues,” she said.
As a candidate, Biden pledged to look into the matter if elected and has expressed an interest in canceling $10,000 per borrower. There was no word on how Biden will handle the issue even as the pressure builds on him. The White House has suggested that there would be some sort of income criteria that would prevent high earners from benefiting.
Debt payments were suspended by President Donald Trump just before the coronavirus pandemic began, and Biden has maintained the freeze while considering a more permanent solution.
Every decision carries political risks. Republicans accuse Biden of planning an election year giveaway. Activists are urging him to call in at least $50,000 per borrower, and anything else could disappoint them.
“President Biden, canceling $10,000 in student debt is like pouring a bucket of ice water on a wildfire,” NAACP President Derrick Johnson said in a statement. Black students and other colored students are more likely to borrow to pay for college.
The Corinthian announcement, which operated from 1995 to 2015, seeks to close the books on one of the most notorious fraud cases in American higher education. At its peak, Corinthian was one of the largest for-profit college corporations with more than 100 campuses and more than 110,000 students at its Everest, WyoTech, and Heald schools.
When Harris was Attorney General in California, she worked with the Obama administration to expose how universities falsified data on the success of their graduates. In some cases, schools reported that students had found jobs in their majors despite working at grocery stores or fast-food joints.
Students told investigators they were often pressured into enrolling with promises of lucrative employment, only to end up with huge debts and few job prospects. Federal officials found that the company had erroneously told students that their coursework could be transferred to other colleges.
Harris said Corinthian tried to attract students who were single parents or unemployed and wanted to improve their lives.
“The company thought they could get away with it because, as predators are used to, they would target people they assumed wouldn’t fight back,” she said.
Tens of thousands of former Corinthian students were already eligible for debt relief, but they had to submit paperwork and go through an application process that advocates say is confusing. The relief will now be carried out automatically and extended to other borrowers.
Those with a balance of their Corinthian debt will also receive refunds for payments already made, ministry officials said. However, the promotion does not apply to fully paid loans. A spokesman for the Department of Education did not respond to a question as to why the decision was made.
The Corinthian scandal led to a federal crackdown on for-profit colleges, and the Obama administration promised to forgive Corinthian students whose programs had lied about placement rates. This administration extended a procedure known as borrower defense to repayment, which allows any cheated student to seek debt relief.
The Trump administration was criticized when it began giving cheated students only partial loan cancellations, leaving those with higher incomes less relief. Former Corinthian students sued, and a federal judge halted the policy and ordered the Department of Education to stop collecting Corinthian debt payments.
The Biden administration later announced full cancellation for all Corinthian students who had been granted only partial forgiveness, but thousands others waited for the department to process their requests for aid.
By December, the department reported that it had more than 109,000 outstanding applications from students alleging fraud by their colleges, mostly in for-profit industries.
Libby DeBlasio Webster, senior counselor for the Student Defense advocacy group, called it a “fresh start” for former Corinthian students, but noted that many betrayed students from other nonprofit colleges are awaiting help.
She said she hopes the news is “a sign that other decisions are on the horizon for thousands of similarly plighted students waiting for that kind of relief.”
Former Corinthian student Nathan Hornes had his debt forgiven through the 2017 Borrower Defense Trial, but his sister Natasha is among the 560,000 former Corinthian students who are now being annulled.
“My sister and everyone else who had the same experience of being scammed by Corinthian are finally experiencing the same relief that the financial burden has been lifted,” he said in a statement. “They deserve it, and I’m so glad that they can finally feel this freedom today.”
A for-profit college trade group said students deceived by their colleges deserve relief, but that Corinthian’s actions “do not represent all private trade schools.”
“The Department of Education and others should not conflate an organization’s actions with an entire sector that has provided opportunities for millions of students and contributed to our nation’s workforce,” said Jason Altmire, President and CEO of Career Education Colleges and Universities.
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