Corinthian Colleges Debt Relief: Education Department Announces Plan To Forgive Federal Student Loans

The U.S. Department of Education announced Monday its debt relief plan for the more than 16,000 students who attended the now-closed for-profit Corinthian Colleges Inc. The plan loosens the restrictions on who can seek out federal loan discharges, which could cost up to $3.6 billion, the Associated Press reported.

"Where students have been harmed by fraudulent practices, I am fully committed to making sure students receive every penny of relief they are entitled to under law," Education Secretary Arne Duncan said in a statement.

Students at schools that shut down -- including the 28 remaining Corinthian campuses that closed suddenly in April -- can request a closed school loan discharge or try to transfer their credits. This is usually open only to people who attended a school within four months of its closing. But the Education Department extended Monday this option to people who withdrew from a Corinthian school after June 20, 2014, the day Corinthian agreed to sell or shutter all of its campuses. Students seeking closed school loan discharges have to forsake their class credits in order to qualify, however.

Even if their school didn't close, students can request federal loan forgiveness if they think they were victims of fraud under "borrower defense to repayment." People have to show that a college broke the law, but the department wrote in a news release that it will "rely on evidence established by appropriate authorities in considering whether whole groups of students (for example, an entire academic program at a specific campus during a certain time frame) are eligible for borrower defense relief."

In these cases, like the ones based on misrepresented job placement rates at Heald College (part of the Corinthian network) from 2010 to 2014, all students have to do is fill out an attestation form. About 40,000 Heald students with approximately $600 million in unpaid debt became eligible for forgiveness with Monday's announcement, U.S. News and World Report writer Allie Bidwell tweeted.

While the applications are processing, students' loans will go into forbearance, meaning their payments are paused. This includes about 1,400 cases so far, Inside Higher Ed reporter Michael Stratford tweeted.

The Education Department plans to hire a special master to oversee the entire process. "Loan forgiveness can’t give students back the time they invested at Corinthian," Undersecretary Ted Mitchell wrote in a blog post. "But it will help them make a fresh start."

In response, Maggie Thompson of Higher Ed Not Debt, a coalition of progressive groups housed at the liberal Center for American Progress, released a statement Monday saying the department had not done enough for students. "Corinthian students deserve a full and automatic refund," she said. "We hope this action is just a first step as it is insufficient to address the true scope of the harm Corinthian caused students."