Former For-Profit College Students Demand Full Debt Relief

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A group of past students at the former Corinthian Colleges are taking legal action against the United States Department of Education.

In early March, the former students made the claim that the department illegally gained information about how much money they earn. The students say the agency used the Social Security Department data to limit their student loan debt relief.

Corinthian Colleges was a for-profit higher education company that operated several schools across the U.S. and Canada. In 2015, the U.S. government found evidence it was defrauding¹ its students.

The government found the company was giving false information to students in several ways. This included information about how likely students were to find jobs after they completed their study programs. Corinthian also lied to the government about the number of students who completed their programs.

The Department of Education made the company pay a $30 million fine. Shortly after, Corinthian closed its operations and declared bankruptcy², or financial failure. The company then sought legal protection from its debts and a plan for reorganizing.

In 2016, Corinthian was found to owe about $300 million to non-student debtors³. The state of California also won a judgement against Corinthian of more than $1 billion for former students.

The Education Department has the ability to, in many cases, forgive student loan debt. Under President Barack Obama, the department paid $550 million to forgive student loans for tens of thousands of former Corinthian students. The Education Department then created new rules governing how for-profit colleges and universities were able to accept student loan money.

There are still thousands of former Corinthian students waiting for their loan debts to be cancelled. Then, last July, current Education Secretary Betsy DeVos announced changes to the Obama administration orders. In December, she announced that the remaining former Corinthian students may not receive full debt relief.

Instead, the Education Department will now compare average incomes among Corinthian students to those of other universities. It will use this information to decide how much of an individual loan should be forgiven.

For example, former Corinthian nursing students who earn less than 50 percent of the average amount earned by nursing graduates from other schools will get full debt relief. But if they earn more than 70 percent of that average income, only 30 percent of their loans will be forgiven.

DeVos said in December that “No fraud is acceptable, and students deserve relief if the school they attended acted dishonestly.” But, she added, the new process protects taxpayers⁴ from being required to share this responsibility.

Now, a group of Corinthian students in California say her decision is a violation⁵ of several laws and the U.S. Constitution.

Attorneys with the Project on Predatory Student Lending at Harvard University are representing the students. The legal team says the department was wrong to take the information on the students’ earnings⁶ from the Social Security Administration directly. Instead, they say the Education Department should have asked the students for that information. Also, the department should have told the students of its actions in order to give them a chance to react.

Joshua Rovenger is one of the attorneys representing the students. He said the department “has secretly and illegally co-opted Social Security data to try to argue for something less than the complete cancellation⁷ and refund⁸ that these borrowers are due.”

The group has taken its case to federal court. They are asking the Education Department to change its decision. The latest legal action is part of a larger case against the department on the part of former Corinthian students.

Rick Hess argues that DeVos’ methods mark the best path forward. He is the head of education policy at the research group the American Enterprise Institute.

He told the Associated Press, “Any of us who has ever taken a loan for a house or car or a degree would like 100 percent loan forgiveness. We also pay taxes and we want people who borrow public dollars … to repay them.”

“But I think that what this administration is getting right is trying to … balance between respecting the rights to wronged borrowers and respecting the rights of taxpayers.”

However, Sarah Dieffenbacher strongly disagrees. She is a health care worker and mother of four children who studied at Everest College, a Corinthian school in Ontario, California. She borrowed about $67,000 to train in the legal field, yet was unable to get any job in that field.

She received a letter saying the agency would only relieve 50 percent of her student loans. Dieffenbacher told the Associated Press that the decision was completely unfair.

“I think it’s an insult to my intelligence, I think it’s a kick in my face,” she said. “I received no valuable education from them.”

I’m Pete Musto. And I’m Dorothy Gundy.

Words in This Story

data – n. facts or information used usually to calculate, analyze⁹, or plan something

relief – n. the removal or reducing of something that is painful or unpleasant

defraud(ing) – v. to trick or cheat someone or something in order to get money

income(s) – n. money that is earned from work, investments, or business

nursing – n. the job of taking care of people who are sick, injured, or old

graduate(s) – n. a person who has earned a degree or diploma from a school, college, or university

deserve – v. used to say that someone or something should or should not have or be given something

attorney(s) – n. a person whose job is to guide and assist people in matters relating to the law

co-opt(ed) – v. to use or take control of something for your own purposes

refund – n. an amount of money that is given back to someone who has returned a product or paid too much