U.S. will forgive $5.8 billion of loans to Corinthian Colleges students

The U.S. Department of Education will forgive $5.8 billion of federal student loans for those who attended Corinthian Colleges, a chain of for-profit schools that deceived students about their job placement rates and students' ability to transfer credits.

It is the single largest discharge of student loans in history, according to the department.

The move, which was announced Wednesday, will impact 560,000 borrowers, the Education Department said.

'Wholesale financial exploitation'

In 2015, the Education Department found that Corinthian had "engaged in widespread and pervasive misrepresentations" about borrowers' future job prospects, including promises they would find a job.

The Department also found that Corinthian had falsified its public job-placement rates and misled prospective students about their ability to transfer credits.

"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," Secretary of Education Miguel Cardona said.

Central to the case against Corinthian was California's then-Attorney General, Kamala Harris, who sued the company in 2013, alleging it used deceptive and false advertising and recruitment tactics.

Harris' case against Corinthian helped lay the groundwork for the Education Department's 2015 findings against the chain, which allowed defrauded students to apply for loan cancellation under a provision known as borrower defense.

Since then, the Department says, roughly 100,000 Corinthian borrowers have had their debts discharged through the traditional borrower defense process.

With this latest news, though, the Department is dispensing with the need for an application and automatically erasing all remaining federal student loan debts for any borrower who attended a Corinthian campus.

Students affected do not have to take any further action to receive a discharge, and the government says it will begin notifying borrowers soon.

"It's a tremendous victory," says Eileen Connor, who directs the Project on Predatory Student Lending. "It is going to improve the lives of so many people. It's going to end suffering for so many people. And it's the right thing to do. I'm overjoyed."

Corinthian Colleges, Inc. was founded in 1995 and later acquired several for-profit schools across the country.

In 2010, more than 110,000 students were enrolled across its 105 campuses, which included Everest colleges. But, by 2015, Corinthian had either sold or closed all of its campuses.

In 2016, Harris and the state of California won a judgment of $1.1 billion in their case, including $820 million in restitution on behalf of the students and $350 million in civil penalties.

$25 billion in loan forgiveness so far

This is just the latest – and largest – effort by the Biden administration to provide targeted student loan relief.

In February, for the first time, the department said it would grant borrower defense claims while the school accused of defrauding borrowers, DeVry University, remained open for business.

The Education Department has also made it easier for borrowers to shed their debts through the Public Service Loan Forgiveness program and a separate loan discharge program for borrowers with permanent disabilities – both had been the subjects of NPR investigations.

In all, the Biden Administration says, it has approved $25 billion in loan forgiveness for 1.3 million borrowers.

It's not clear, though, what this move says, if anything, about the possibility of broader loan forgiveness.

Pressure has been building on the White House, which has repeatedly leaked to reporters that Biden could soon announce plans to forgive $10,000 per borrower, with some income limits. But officially, the White House insisted late last week that "no decisions have been made yet."

This story has been updated with new details

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