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Feds to forgive loans for students who attended Corinthian Colleges

Corinthian College img80With the collapse of Corinthian Colleges Inc. – known under the names Heald, WyoTech, and Everest colleges – the U.S. Department of Education is announcing next steps to support students who attended the schools.

Arne Duncan, secretary of the department, has directed his staff to ensure that students who have been defrauded by their college, or because their school closed down, receive debt relief.

Some Corinthian schools closed, but others were sold and remain open.

The department estimates that if all 350,000 Corinthian students over the last five years applied for and received debt relief, that cost could be $3.5 billion.

For Corinthian students whose schools closed

Students who were enrolled at Corinthian schools that closed can choose between discharging their student loans and transferring their credits to another school.

Usually, only students who withdraw within 120 days of a school’s closing, or who were attending the school when it closed, can receive a closed school discharge.

However, the department is extending the time frame to include students who withdrew from one of the closed schools on or after June 20, 2014, Ted Mitchell, under secretary of education, said in a department blog. That’s the date Corinthian agreed to close or sell all its schools.

If they believe they were defrauded, students whose schools closed may opt for debt relief, rather than closed-school loan discharge.

For students who need help with closed-school debt relief, the department is working with NextStepsEDU.org, a group of organizations and institutions, including the California State University System, the California Community College System, Beyond 12, and financial aid counselors.

Other organizations may also be offering assistance.

For former Corinthian students who want debt relief because of fraud, including Heald College students

For students to receive debt relief under this provision, they need to show that their college defrauded them under a state law.

To ensure that students won’t fall behind on payments or default on their loans before claims can be resolved, the department will offer all applicants for debt relief the option of getting special permission to stop payments, and, for students in default, to halt collection activity.

To assist in the resolution of claims, the department has established that Corinthian misrepresented job placement rates for a majority of programs at its Heald College campuses between 2010 and 2014.

These findings allow defrauded students enrolled in these programs to discharge their federal student loans, based on a stating that they relied on those fraudulent rates.

Holding institutions accountable

Too many of America’s large “career colleges” are failing to live up to the name, said Mitchell.

Rather than providing students with the opportunity for a solid education that leads to a good job, some of these institutions – often run by for-profit companies – have left students with staggering debt and few job prospects, he said.

“It’s impossible not to be moved by the stories of students whose futures were damaged by the institutions they once believed were setting them on a path to a better life,” Mitchell said. “These processes will offer them real and badly needed help. Loan forgiveness can’t give students back the time they invested at Corinthian. But it will help them make a fresh start.”

Information for students

If you’re a Corinthian student seeking debt relief of either type, visit the FSA website or call 855-279-6207.

Copyright 2015, Rita R. Robison, Consumer Specialist

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