NASDAQ: Education Department. to Temporarily Stop Collections on Defaulted Corinthian Student Loans

Career College Central Summary:

  • Students of the now-defunct Corinthian Colleges Inc. who have defaulted on loan payments to the Education Department will get a few months' reprieve, according to court documents filed Friday.
  • The department will stop collection efforts on 40,000 defaulted Corinthian student loans through November 6, as it negotiates with a committee representing the students. The agreement comes at the urging of a bankruptcy judge, who last week declined to order the government to take the action but strongly encouraged a voluntary resolution.
  • Many former students of the bankrupt for-profit college operator have argued in bankruptcy filings in Delaware and elsewhere that they were misled and defrauded by the college and therefore shouldn't be responsible for those outstanding loans.
  • The department is still examining these claims and is working on agency procedures outside of the bankruptcy process. It has hired a monitor to help with the process and said that as of last month it had received nearly 6,000 applications for forgiveness and granted nearly 500.
  • Under the agreement, the department will request that offices handling default cases that have been referred to the U.S. Attorney cease collections and wage garnishment. It also stipulates that 50,000 former students of Heald College, one of the school chains Corinthian operated, will receive email notices of the agency's willingness to place their loans in forbearance and their right to apply for full student-loan discharge. Forbearance, which any Corinthian student can apply for—including Everest and WyoTech students—also temporarily halts collections efforts, but students that haven't defaulted on their loans must actively request it.
  • A committee representing former Corinthian students in the defunct college operator's bankruptcy case had asked that all student-loan collection activity—including against those actively making payments—be suspended during the bankruptcy case. That relief would have affected more than 500,000 students and billions of dollars in student-loan debt held by the federal government.
  • The Education Department objected to that course and said that instead it would be willing to stop collecting from any student that asks for forbearance, but wouldn't do so automatically. Instead it would require that students formally file a request for forbearance.

Click through to read the full article.


Leave a Reply

Be the First to Comment!

Notify of