Too many of America’s large “career colleges” are failing to live up to the name. Rather than providing students with the opportunity for a solid education that leads to a good job, some of these institutions — often run by for-profit companies — have left students with lots of debt and few job prospects, putting both students and taxpayers at risk. This Administration is committed to changing that, through action to hold institutions accountable and to ensure Americans are protected from unscrupulous colleges that deny students meaningful educational opportunities and leave taxpayers holding the bag.
Over the past six years, the Department of Education has taken unprecedented actions to establish tougher regulations to prevent misleading claims by career colleges. The Department also issued “gainful employment” regulations, which will help ensure that students at career colleges don’t end up with debt they cannot repay. This Department has also cracked down on bad actors through investigations and enforcement to hold colleges accountable in order to improving the value of their programs, protect students from abusive colleges, and safeguard the interests of taxpayers.
College remains the best investment students can make in their future – and students deserve a fair and honest deal. And some for-profit career colleges play a critical role in helping students succeed in their educational and training pursuits. However, when unscrupulous companies take advantage of students, federal and state agencies must step in, and Congress must support those efforts.
Secretary Duncan has directed our team to ensure that students who have been defrauded by their college, or because their school closed down, receive every penny of the debt relief they are entitled to, as efficiently and easily as possible. That need has grown pressing in recent months because of the wind down and ultimate collapse of Corinthian Colleges Inc. (known under the brand names Heald, WyoTech and Everest), following enforcement actions by this Administration and scrutiny by other enforcement entities. Today, our Department is announcing next steps to support students who attended Corinthian schools. We are also committed to ensuring accountability and to continue working aggressively toward reforms that ensure that schools are held responsible for their actions.
How debt relief will work for Corinthian students
Our team has been at work to develop a streamlined process for getting debt relief to Corinthian students. Our aim is to make the process of forgiving loans fair, clear and efficient.
Some Corinthian schools closed down, while others were sold but remain open. We are establishing plans to ensure debt relief for:
- Students whose schools have closed down
- Students who believe they were victims of fraud, whether their school closed or not
These processes are described in our fact sheet and are summarized here.
Information for students
If you are a Corinthian student seeking debt relief of either type, please visit the FSA website or call toll-free at (855) 279-6207 and a staff member will provide the information you need.
For Corinthian students whose schools closed
Students who were enrolled at Corinthian schools that closed can now choose between discharging their student loans (called a “closed school discharge”) and transferring their credits to another school. We are reaching out to the affected students and providing clear information and loan discharge applications on the FSA website.
Normally, only students who withdrew (without completing their programs) within 120 days of a school’s closing, or who were attending the school when it closed, may receive a closed school discharge. Today, we are announcing that the Secretary is exercising his discretionary authority to extend that time frame to include students who withdrew from one of the closed schools on or after June 20, 2014. That is the date when Corinthian signed an agreement with the Department to close or sell all its schools.
If they believe they were defrauded, students whose schools closed may opt for debt relief under borrower defense, as described below, rather than closed-school loan discharge.
For those who need help with closed-school debt relief, the Department is working with an independent group of organizations and institutions, including the California State University System, the California Community College System, Beyond 12, and financial aid counselors, who have teamed up to create a volunteer advisor corps to help Corinthian students navigate their options. Contact them at NextStepsEDU.org to talk to a volunteer advisor. The Department did not create this corps and there may be other organizations that are available to help students. We encourage all students to investigate the best available avenues for assistance.
For former Corinthian students who would like to seek debt relief because of fraud, including Heald College students
Borrowers can make a claim for debt relief because of fraud under a legal rule called “borrower defense to repayment.” This rule requires students to show that they were defrauded by their college under a state’s laws, and we are committed to working with students to make that the simplest, fastest process possible.
In order to ensure that students do not fall behind on payments or default on their loans before claims can be resolved, we will offer all applicants for debt relief the option to go into loan forbearance (a special permission to stop payments), and for students in default, to halt collection activity.
In order to promote efficiency in the resolution of claims and to minimize the burden on students, wherever possible, we will work to use legal findings applicable to groups of students (for example, an entire academic program at a specific campus) to resolve students’ claims. As a first step, in this particular case, the Department has already established that Corinthian misrepresented job placement rates for a majority of programs at its Heald College campuses between 2010 and 2014. Today, we are announcing that these serious findings entitle the defrauded students enrolled in these programs to a discharge of their Federal Direct Student loans, based on a simple attestation that they relied on those fraudulent rates. And we are providing a simple form that will allow students to quickly give us the information we need to give them debt relief.
Going forward, the Department will appoint a special master to oversee borrower defense issues and charge that person with ensuring our process is clear and fair, including a simple, streamlined application for debt relief.
Holding Institutions Accountable
America’s students deserve protection against unscrupulous companies that leave students deep in debt, and with few prospects for employment. Our Administration has taken and will continue to take aggressive steps to protect students and to hold schools accountable, including:
- Establishing new student aid rules to protect students and taxpayers, to ensure students receive an education that leads to good job prospects.
- Strengthening oversight and compliance through inter-agency and Department teams focused on monitoring for-profit institutions.
- Creating options that make student debt more manageable for borrowers, through flexible repayment options such as the Pay As You Earn plan, which caps student loan payments at 10 percent of a borrower’s discretionary income
- Protecting military service members, veterans and their families from predatory actions by for-profit colleges
- Providing families with clear information to make a smart college choice, by providing a wealth of consumer tools designed to help students and families decide which college is right for them
It is impossible not to be moved by the stories of students whose futures were damaged by the institutions they once believed were setting them on a path to a better life. These processes will offer them real and badly needed help. Loan forgiveness can’t give students back the time they invested at Corinthian. But it will help them make a fresh start.
Ted Mitchell is U.S. Under Secretary of Education.