More federal loan debt forgiven for Corinthian students

AP News
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Posted: Dec 03, 2015 4:42 PM

WASHINGTON (AP) — The government is erasing the loan debt of more than 7,000 former students of the now-defunct Corinthian Colleges — totaling over $100 million, but still representing a tiny fraction of a federal debt-forgiveness program that could run well into the billions of dollars.

The Education Department announced Thursday that it has approved a second wave of Corinthian loan forgiveness, this one for students who filed "borrower's defense" claims with the government, alleging they were lied to or misled by the company. Corinthian was once one of the largest chains of for-profit colleges but filed for bankruptcy protection in May 2015 amid fraud allegations.

In a progress report released by the department, Joseph Smith, who is overseeing the debt relief, said his team has approved relief to 1,300 former Heald College students, totaling nearly $28 million in loans that now will not have to be repaid to the government.

"We will continue to provide forgiveness to every student who has been similarly mistreated," said Ted Mitchell, the department's undersecretary.

Heald, which had campuses in California, Hawaii and Oregon, was one of three schools under the Corinthian umbrella. The other two were Everest and WyoTech schools in California, Arizona and New York.

Another 5,800 former students from Heald, Everest and WyoTech who filed "closed school" claims with the government will see their debt discharged, totaling $75 million. In his report, Smith said he expects tens of millions of dollars of additional relief to be granted in the coming months under the closed-school claims.

In all, education officials have said the bailout of Corinthian students could potentially cost up to $3.2 billion, if all students who borrowed government money dating back to 2010 were to seek relief. But officials also have said all former students may not file claims.

To date, more than 17,000 claims for college loan debt relief have been received by the department. Most of them cover Corinthian schools, though some claims have been received for other schools, including the Art Institute, ITT and the University of Phoenix, said Smith's report.