After years of miseducating students nationwide, Everest College is finally toppling from its perch at the peak of the for-profit college bubble. But now thousands of alleged fraud victims are mired in a debt trap of epic proportions.
Of course, the collapse was a longtime coming, as Everest’s parent company, the disgraced for-profit college chain Corinthian, has been wrestling for months with legal charges over false advertising and financial misconduct. But although the Department of Education (DOE) has offered to discharge the debt that Corinthian students have racked up, activists say the government—that is, their lender—is failing to help defrauded students escape potentially billions in debt.
In April, the closure of Everest Institute in Rochester, New York with scant prior warning, left many students distraught. As one student, studying to be a medical asssitant, told the local paper, “Most of us here have kids. We’re struggling parents trying to make our lives better,” she said. “Now all I’ve got is a tuition bill for $9,000. How am I going to pay that?”
Technically, students should generally be eligible to have their loans discharged if they completed part of their coursework a Corinthian school within roughly the past year, before the company announced the closure and sale of dozens of remaining campuses last spring. The enrollment at the time totaled about 16,000 students (holding some $214 million in debt), down from 72,000 last year when the company’s phased shutdown began.
But Maggie Robb, an attorney with the civil legal aid group Empire Justice in Rochester, sees little in the way of Plan B for local Everest students who have streamed into her office. “The current process,” she says, “places the burden on actual students to receive the discharge application, understand the application, apply for the discharge, and understand any future decision that may come their way all on their own.” Though students of closed schools should qualify for immediate debt forgiveness, Robb adds, “Even I as a lawyer found it to be very difficult to make my way” through the process.
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Amidst growing rage at the subprime lending crisis of higher education, a grassroots debt strike campaign emerged earlier this year, led by the Debt Collective and a group of Corinthian student strikers. They argue that while Wall Street profited handsomely from the for-profit college industry (and Corinthian may score financial relief by filing for Chapter 11 bankruptcy), the losses are shifted onto poor students, now left with only worthless degrees and loads of debt. Many were working-class adults or veterans, who had limited options for obtaining an affordable degree.
The DOE’s legal machinery may be turning too slowly for those who need relief now. Officials say students can qualify for Defense to Repayment loan forgiveness “if that school committed fraud by doing something or failing to do something, or otherwise violated applicable state law related to your loans or the educational services you paid for.” In the case of one branch of Corinthian, California-based Heald College, the DOE is offering a separate expedited relief process based on an investigation that found that the schools “misrepresented job placement rates.” The school was fined $30 million for deceptive marketing of various academically sketchy programs like “office skills.”
But Robb says many students remain in a financial straitjacket, lacking the resources and legal savvy to navigate the opaque relief process. The application procedure is rougher for the type of low-income students that Corinthian tended to attract. “The students in Rochester… don’t have a lot of access to computer resources, they don’t know how to proceed on their own,” Robb says. “Everything is very confusing to them. They don’t have access to a private attorney.” The most disadvantaged students may fare the worst: “Many of the students we’ve met don’t own computers. Their access to information and email was through Everest.”
Out of hundreds of Rochester students who are thought to be affected by Everest’s collapse, Empire Justice has helped “dozens and dozens” of students initiate petitions, Robb says, but many might be unaware that relief is available, or might not even know who their loan servicer is. In some cases, she adds, “unfortunately, many of these students are being dissuaded [by] their loan servicers in applying for the discharge.” In the coming weeks, Empire Justice plans to launch an outreach campaign to raise awareness about the relief programs. But given the breadth of the financial devastation, Robb says, “their ability to rise above this terrible situation is being thwarted at every turn.”
Legal advocates also object to the case-by-case nature of the current petitioning process, noting that there should be blanket relief for all Corinthian students. Echoing the demands of the student debt strikers who are calling for a more streamlined relief process, Empire Justice wants DOE to apply approach they are using for the Heald students to other Corinthian schools, since the deceptive advertising was widespread.
“We believe students from… colleges around the country were in exactly similar circumstances, yet the Heald students are treated differently,” Robb said, noting there has not been a comparable federal investigation of other campuses. “Everest students, we feel, are being left out in the cold when it comes to the Defense to Repayment option.”
Following the campus shutdowns, many student debtors are now directing their ire at the government, which they blame for exacerbating the fraud by obstructing the narrow pathway for relief.
Former Everest student-turned-debt striker Ashlee Schmidt commented recently on the Debt Collective blog that the DOE has a responsibility to repair the damage it indirectly facilitated, when it provided the federal loans that fueled Corinthian’s fraud:
After being harassed by the loan companies and feeling the frustration and pain of not finding a job, I decided to swallow my fears and help others like myself…. I see Corinthian and the DOE as the biggest bullies out there because they took advantage of so many students and their families.
Now that their debts are coming due, the Corinthian students see no reason why, after getting pumped with loans so quickly and recklessly, they now face such an unconscionable delay, as they seek justice for stolen money and wasted time.
