The controversy swirling around student debt cancellation largely ignores the fact that many of those drowning in debt were enrolled at for-profit schools that provided education widely regarded as worthless.
Corinthian Colleges topped the list of for-profit schools that signed students up for federal loans and then delivered a substandard education that did nothing to advance students’ job prospects.
When she was California Attorney General, Kamala Harris was among those who prosecuted the school for intentionally misleading students. Now, the Biden Administration is forgiving all outstanding federal student loans held by 560,000 former Corinthian Colleges students.
The U.S. Department of Education will forgive $5.8 billion in outstanding debt in what the agency said was the largest single loan discharge in its history.
“As of today, every student deceived, defrauded, and driven into debt by Corinthian Colleges can rest assured that the Biden-Harris administration has their back and will discharge their federal student loans,” said U.S. Secretary of Education Miguel Cardona. “For far too long, Corinthian engaged in the wholesale financial exploitation of students, misleading them into taking on more and more debt to pay for promises they would never keep.”
Corinthian was notorious
In its heyday, Corinthian was one of the largest for-profit higher education companies. It closed its doors in 2015, after being sued by federal and state consumer protection agencies.
In September 2014, the Consumer Financial Protection Bureau (CFPB) sued Corinthian for luring students into taking out private loans to cover expensive tuition costs and using abusive debt collection techniques, such as pulling students out of class, denying access to academic resources and withholding diplomas. In late 2015, a federal court ruled in favor of the CFPB and ordered Corinthian to pay $530 million in restitution to former students.
Consumer groups reacted warmly to the news of the loan forgiveness but said the Biden Administration needs to go further.
“The administration now needs to immediately cancel $50,000 of student loan debt per borrower and abandon its piecemeal approach to cancellation,” said Center for Responsible Lending Senior Policy Counsel Whitney Barkley-Denney.
“While historic, the relief provided to Corinthian students represents only a tiny fraction of students who need cancellation. Millions of low-income borrowers and borrowers of color continue to carry the burden of an unforgiving student loan crisis,” Barkley-Denney said.
1.3 million student borrowers
Including this group discharge, the Education Department has approved $25 billion in loan forgiveness for 1.3 million borrowers. This includes:
- $7.9 billion for 690,000 borrowers whose institutions took advantage of them through discharges related to borrower defense and school closures.
- $6.8 billion for more than 113,000 borrowers through Public Service Loan Forgiveness (PSLF).
- More than $8.5 billion in total and permanent disability discharges for more than 400,000 borrowers.
The Department also recently announced fixes to long-standing problems in income-driven repayment that will help thousands of borrowers receive forgiveness through that program as well as 40,000 borrowers who receive PSLF.