Corinthian College students eligible for loan forgiveness

Wednesday, February 04, 2015

Corinthian College students with high-cost private loans from the for-profit school will see a 40% reduction in what they owe, as part of a deal negotiated by the Department of Education (ED) and the Consumer Financial Protection Bureau (CFPB). The student loan forgiveness plan is part of a relief program for students who borrowed costly private loans (called Genesis loans) from Corinthian College.

The CFPB sued Corinthian last fall for luring students into enrolling and taking out  predatory loans. More than 60% of Corinthian students defaulted on Genesis loans within three years.

To avoid liability for Corithian’s allegedly illegal lending practices, the school’s new owner, ECMC Group, agreed to concessions laid out by regulators to help relieve student debt burdens. Operating as Zenith Education Group, ECMC will:

• Reduce student Genesis loan debt by $480 million – Eligible current and former students will automatically see 40% of their private Genesis loans forgiven and will be contacted by loan servicers directly.
• Correct students’ credit reports – Credit bureaus will be instructed to remove all damaging Corinthian Genesis loan information from borrowers’ credit records.
• Stop harassing and threatening borrowers – Student borrowers will no longer be sued or harassed for falling behind on Genesis loans.

Genesis loan borrowers won't need to apply for the relief – it's automatic. However, borrowers should make sure loan servicers have their current contact information.

While the sale’s current terms include significant private debt relief, there are thousands of students who were left out. Former Corinthian students with federal student loans are not eligible for debt relief. About 40% of students currently enrolled in certain programs (listed here) will receive a choice of finishing their program, accepting a voucher, or a full refund. ECMC (through Zenith Education Group), will present these options to students – a potentially intimidating conversation. The other 60% of current students who withdraw from a Corinthian school that was sold to ECMC may or may not be entitled to a refund.

Student loan advocates, including Consumer Action, raised concerns last fall with the Department of Education and the CFPB regarding the sale of Corinthian campuses to ECMC. Many of those concerns remain, however the sale’s terms include several provisions Consumer Action and its coalition advocates pushed for last year, including a ban on arbitration clauses in student enrollment agreements and stronger gainful employment rules.

For years, Corinthian embellished job placement rates and engaged in other unscrupulous practices to encourage students to enroll and take out high interest loans. Corinthian was also sued for high-pressure debt collection tactics while some borrowers were still in school.

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