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AFR Statement: Education Department Must Immediately Cease Collections on Defrauded Corinthian Students, Cancel their Debts without Application

Submitted by on September 29, 2016 – 9:37 am
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Americans for Financial Reform (AFR) is dismayed to learn that the Department of Education is still actively collecting on nearly 80,000 former Corinthian students. These actions run counter to the requests of AFR and a coalition of advocates led by the National Consumer Law Center who wrote in May 2015 to urge the Department to “immediately cease collecting the federal student loans of all students who attended Corinthian.” AFR is deeply disappointed to learn that the Department of Education has failed to take this important step to protect borrowers..

We commend Senator Elizabeth Warren (D-MA) for requesting and releasing data on the number of former Corinthian students in debt collection with the Department. When the Corinthian crisis hit, the Department of Education promised to provide former Corinthian students with “every penny of relief they are entitled to under law.” The findings released by Senator Warren show that the Department of Education has broken the commitment it made to scammed Corinthian students.

By the Department’s own estimates, 125,000 former Corinthian students are covered by its two enforcement actions against the school (40,000 Heald students and 85,000 Wyotech and Everest students). Yet, as Senator Warren points out in her letter, there are currently more former Corinthian students who are having their wages garnished by the government than there are students who’ve actually received relief through a borrower defense discharge – with over 4,000 of the former as opposed to only 3,878 of the latter.

AFR has long called on the Department use its legal authority to discharge these debts now, without an individual application – as have former Corinthian students, advocates, lawmakers, and law enforcement officials, with requests dating back to 2014. It is shocking that even after years of this broad and diverse coalition making a powerful case for automatic cancellation of Corinthian debt, the Department has not taken the step of suspending debt collection for these defrauded students. While the Department slow-walks debt cancellation, former students struggle with the nightmare of ever-accruing interest, bad credit, seized tax returns, and garnished wages.

The Department has taken strong, important steps recently to protect students still ensnared at other predatory for-profit colleges like ITT Educational Services, Inc. (ITT). We commend the Department’s actions earlier this month to prohibit ITT from enrolling new students using federal financial aid, and to de-recognize a major accreditor of for-profit colleges, the Accrediting Council for Independent Colleges and Schools (ACICS). The Department must bring the same focus on protecting students it has brought to its actions on ITT and ACICS, and apply it to the former Corinthian students still buried in debt to a school the Department itself said it was “thrilled” to close. We call on the Department to immediately cease collections on defrauded Corinthian students, and to cancel these students’ debts without application, and without further delay.

 

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