Corinthian Colleges, once among the largest for-profit educational institutions, collapsed Monday under charges of predatory lending, deceptive advertising, falsifying job-placement statistics, and other abuses. One of the questions raised immediately by Corinthian’s closure is what will happen to the current students who’ve borrowed federal money to attend the sham school—will the government forgive their loans? And what about former students, or those who attended other fraudulent for-profit schools?
Massachusetts Senator Elizabeth Warren laid into the Department of Education on Monday for not doing enough to help Corinthian students and others get rid of their debt. Speaking alongside Representative Elijah Cummings at Howard University, Warren said that the department “has all the information it needs to simply discharge the loans” of Corinthian students. “But the department isn’t doing that.” The problem is that many borrowers don’t know they might be eligible for relief, and neither the Education Department nor the companies that service the loans are telling them.
“These borrowers—people who were cheated and people who have been buried in debt— just keep on paying and the government just keeps on collecting,” she continued. “This is wrong…. The government should not be making a profit off the backs of people who are trying to get an education. Can I get an amen on that?” She did.
Warren, Cummings, and four other Democrats in the Senate sent a letter Monday to the Education Department and the four companies that service federal loans, expressing concern “that students may not be receiving adequate information about the relief options available to them,” and asking the department to “take immediate action to identify and inform students with loans eligible for relief that they may qualify for discharge or cancellation.” The letter follows similar ones from House and Senate members, state attorneys general, and the Debt Collective calling on the department to forgive Corinthian students’ loans and establish a clearer process for relieving the debt of students whose schools engaged in fraudulent or other illegal activity.
During the forum at Howard, Rohit Chopra of the Consumer Financial Protection Bureau described the student debt crisis as a “painful aftershock” of the financial collapse in 2008. “Subprime went to college, and students are stuck with the bill,” he said. Indeed, there is a disturbing similarity between the government’s response to underwater homeowners and to student borrowers, as Alexis Goldstein noted Monday. While the government pledged to bail out homeowners along with the big banks, in the end it was the financial institutions that got the lion’s share of the relief. In the case of Corinthian, the government kept infusing the school with cash—$1.2 billion in aid last year, to be precise—despite a slate of lawsuits and investigations from nearly half of the states, the Department of Justice, the Securities and Exchange Commission, and the CFPB. While the Education Department bent over backwards to keep Corinthian afloat, it has exerted little of the same energy on behalf of student borrowers.