A court hearing this week will determine whether or not thousands of former Corinthian Colleges students will have their student loan debt erased.
The class-action lawsuit was filed in California by the Project on Predatory Student Lending and by the Housing and Economic Rights Advocates, USA Today reported. The lawsuit alleges that Corinthian Colleges misled students about their job prospects after graduation. Attorneys for the former students are attempting to get the Department of Education to reinstate a program that would forgive the affected students’ debt.
In 2014, the Department of Education alleged that Corinthian Colleges was recruiting students while advertising inflated job placement rates, for which the Consumer Financial Protection Bureau (CFPB) took action against the school. All said and done, the Department of Education took away the school chain’s eligibility for federal student loans, which cut off the majority of its funding.
As many well know, the Corinthian College chain closed its campuses three years ago, just weeks after the Department of Education announced it was fining the school $30 million for misleading students and altering school records, NBC News reported. This left 16,000 students with thousands of dollars in student loan debt and no degree to show for it.
In light of the shutdown, former students began appealing the Department of Education to forgive their student loan debt. In response, the Obama administration established a protection, the Borrower Defense to Repayment rule, that would grant full loan forgiveness to students who could prove they were defrauded by a for-profit college. However, these protections were rolled back last year under the Trump administration, making it harder for for-profit students seeking forgiveness.
The Department of Education reviewed the requests for loan forgiveness and determined that only six Corinthian programs were misleading, according to the Student Loan Report. In December, the Department of Education established new guidelines for partial loan forgiveness to affected students.
Secretary of Education Betsy DeVos said that these new and improved guidelines would allow borrower claims to be resolved more quickly. She added that this process would ensure that taxpayers aren’t “forced to shoulder massive costs that may be unjustified."
But according to the students’ attorneys, these changes left 110,000 borrowers in limbo. The lawyers also allege that many borrowers have had their tax returns and wages garnished and applied to their outstanding payments. The attorneys argue that this forces borrowers to choose between “paying for their daily necessities or defaulting on their loans.”
Despite this, the lawyers for the Department of Education claim that the revised guidelines provide a fair solution. It remains to be seen what will happen with this lawsuit and how it could affect other students who were left disenfranchised by for-profit schools.
At any rate, reports show that for-profit schools are struggling under lackluster enrollment numbers. In 2017, there were fewer than 1 million people enrolled in for-profit colleges – compared to 2 million in 2010.