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AFR Statement: Department of Education’s approach to relief to Corinthian students remains far too narrow

Submitted by on June 29, 2016 – 7:34 pm
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FOR IMMEDIATE RELEASE: Jun. 29, 2016

CONTACT: Alexis Goldstein, Americans for Financial Reform
alexis@ourfinancialsecurity.org / 202-973-8005

Americans for Financial Reform (AFR) appreciates the news in the fourth and final report by the Borrower Defense Special Master Joseph A. Smith that an additional 1,739 Corinthian students will finally be free of the debt they incurred as a result of the school’s fraud, with new debt cancellation approved for 63 former Wyotech students, 310 former Everest students, and 1,366 former Heald students. (These numbers are on top of the 2,048 Corinthian borrowers whose debts were previously discharged through the borrower defense process). However, the total number of all Corinthian students who have received debt cancellation to date – 3,787 borrowers – is still a tiny fraction of the hundreds of thousands of former Corinthian students still burdened with debts foisted on them by deceptive and abusive practices.

What AFR noted after the release of the third Special Master report remains true today: the pace of relief for wronged Corinthian students through the Department of Education’s borrower defense to repayment process remains far too slow, and its scope frustratingly narrow. Once again, only students who incurred debt after July 1, 2010 – the time period covered in the Department’s past enforcement actions – have received debt cancellation. This leaves out far too many wronged borrowers.

We continue to believe that the Department should be providing automatic group relief for wronged Corinthian students, rather than pursuing the application-based, piecemeal approach it has taken to discharges thus far.

From the default judgments secured by the Consumer Financial Protection Bureau and the California Attorney General’s office against Corinthian, to the documents recently unsealed by the United States Court of Appeals for the Ninth Circuit showing that the school made illegal incentive payments to recruiters, it is clear that illegal acts were endemic throughout the Corinthian chain. In light of this mounting evidence, it is both unjust and unnecessary to require individual applications. As we have throughout the entire Special Master process, we join with the advocates, lawmakers, and law enforcement officials who have all called on the Department use its legal authority to discharge debts of students covered by the Department’s enforcement actions without further delay and without requiring each borrower to make an individual application.

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