HUFFINGTON POST: Obama Administration Considers New ‘Roadblocks’ For Ex-Corinthian Colleges Students Seeking Debt Relief

Career College Central Summary:

  • The U.S. Department of Education is considering new hurdles for student loan borrowers seeking to get out of their debts by claiming their schools swindled them.
  • Days after the abrupt shutdown of for-profit chain Corinthian Colleges Inc., the department is discussing additional requirements for debt-forgiveness applications and hiring an outside party to rule on claims made by aggrieved borrowers, according to people briefed on the plans.
  • Doing so would effectively ignore demands by more than a dozen Senate Democrats, nine state attorneys general and borrower advocates, who have urged widespread debt relief to defrauded student borrowers.
  • The result may be a lifetime of crippling debt for thousands of Americans who obtained questionable credentials at schools that misled them into enrolling. The department, which plans to announce its move next week, hasn’t finalized a decision and may ultimately adopt more borrower-friendly measures.
  • Outstanding federal student debt has nearly doubled to $1.1 trillion since President Barack Obama and Education Secretary Arne Duncan took office in January 2009, federal data show. A greater share of Americans are late on their student loan payments than on their credit cards, home mortgages or auto loans, according to the Federal Reserve Bank of New York.
  • Debt forgiveness applications are based on an obscure provision in federal law dating to the mid-1990s, and in borrowers’ loan contracts, that give them the right to seek loan discharges when they believe they’ve been defrauded by their schools.
  • The issue has recently commanded attention in Washington amid state and federal allegations that Corinthian Colleges Inc., the faltering for-profit chain, systematically duped people into enrolling and taking out federal student loans with false job prospects and fake graduation rates.
  • Corinthian's shutdown this week leaves 16,000 students scrambling for options. The company once had more than 110,000 students spread across more than 120 campuses under the Everest, Wyotech and Heald brands, but it collapsed under the weight of state and federal lawsuits and investigations alleging the company defrauded its students. Corinthian denies wrongdoing.
  • Hundreds of former Corinthian students have filed applications in recent weeks with the Education Department to get their debts discharged under the “defense against repayment” provision. The applicants have cited pending state and federal lawsuits against the company that allege Corinthian misled students into enrolling with false job placement and graduation rates.
  • Separately, more than 100 former Corinthian students have declared a “debt strike” and are publicly refusing to repay their student loans until the Education Department wipes out all federal debts owed by all former Corinthian students.
  • Federal law allows the department to recoup from colleges whatever losses it sustains as a result of forgiving former students’ debts. But because of Corinthian’s troubled finances, the Education Department likely would sustain losses if it were to heed the calls of borrower advocates, such as Sen. Dick Durbin (D-Ill.).
  • The Obama administration has presided over what many for-profit college advocates view as a crackdown on their industry, with rhetoric that disparages the schools and new rules meant to rein in institutions that grant credentials of questionable value yet leave students mired in debt.

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