Loan recipients on 'strike' meet with federal officials

AP News
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Posted: Mar 31, 2015 8:04 PM
Loan recipients on 'strike' meet with federal officials

WASHINGTON (AP) — Pamela Hunt is so overwhelmed by her $56,000 in student loans for what she considers a worthless criminal justice master's degree that she's joined others on a "debt strike" and refusing to pay back the money.

On Tuesday, she walked out of a meeting with officials from the Consumer Financial Protection Bureau and the Education Department she and other former students from for-profit colleges attended on behalf of the "Corinthian 100" feeling cautiously optimistic about the burden being eased.

"I think it can go either way," said Hunt, 55, who works in home health care in Ledyard, Connecticut. She obtained her degree online through Everest College.

The group's name comes from troubled Corinthian Colleges, Inc., which operated Everest College, Heald College and WyoTech before agreeing last summer to sell or close its 100-plus campuses. About 100 current and former students are refusing to pay back their loans, according to the Debt Collective group behind the strike. The former students argue that the department should have done a better job regulating the schools and informing students that they were under investigation.

"I know they heard us but I don't know if they actually understand the significance of what a lot of us are going through," said Hunt, describing former students unable to take out car loans and on the verge of going homeless.

By not paying back their loans, the former Corinthian students potentially face a host of financial problems, such as poor credit ratings and greater debt because of interest accrued.

Already, the Consumer Financial Protection Bureau has asked the courts to grant relief to Corinthian students who collectively have taken out more than $500 million in private student loans.

Officials from the bureau agreed to the meeting Tuesday that included Ted Mitchell, the Education Department's undersecretary. The Education Department is the former students' main target because they want the department to discharge their loans.

In a statement after the meeting, Denise Horn, a department spokeswoman said what these students have experienced is "troubling" and it will will review every claim and "continue to investigate Corinthian to help students as much as possible."

Luke Herrine, an organizer with the Debt Collective in attendance, said government officials seemed "committed to actually doing something about this" and told them they would get back to the former students within 30 days on a proposal they presented.

Many of Corinthian's troubles came to light last year after it was placed by the Education Department on heightened cash monitoring with a 21-day waiting period for federal funds. That was after the department said it failed to provide adequate paperwork and comply with requests to address concerns about the company's practices, which included allegations of falsifying job placement data used in marketing claims and of altered grades and attendance records.

Also Tuesday, the Education Department released a list of nearly 560 institutions — including for-profit, private and public colleges — that had been placed on heightened cash monitoring, meaning the department's Federal Student Aid Office is providing additional oversight of the schools for financial or compliance issues. The department said the effort was done to "increase transparency and accountability."

The administration has taken other steps to crack down on the for-profit college industry, such as announcing a new rule last year that would require career training programs to show that students can earn enough money after graduation to pay off their loans. The rule has been challenged in court by the for-profit education sector.

That's not enough for Sarah Dieffenbacher, one of the former students participating in the effort who owes more than $100,000 in federal and private loans taken out to attend Everest College in Ontario, California.

She said she doesn't even put her studies in paralegal and criminal justice on her resume because she went to apply for jobs at law firms she was told her studies didn't count for anything. Today, she's working in collections for a property management company and can't afford the approximately $1,500 a month she owes in loans.

She said it's only fair that the federal government help them since students weren't told the colleges were under investigation.

"I would like to see them have to answer for why they allowed these schools to continue to take federal loans out when they were under investigation for the fraudulent activity they were doing," said Dieffenbacher, 37.

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Link to Education Department list of schools on heightened cash monitoring:

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Follow Kimberly Hefling on Twitter: http://twitter.com/khefling