More than a thousand borrowers of federal student loans that attended schools owned by the now-shuttered Corinthian Colleges Inc. will have their debt cancelled.
According to The Huffington Post, the U.S. Education Department announced its decision Thursday, citing a provision in a federal law. The ED stated the law allows borrowers to seek full forgiveness if they were led to take out said loans under false pretenses.
Corinthian Colleges shut down all its campuses amid a federal investigation into allegations the company falsified job placement statistics to recruit prospective students. The debt cancellation is expected to forgive about 1,300 former student of $27.8 million worth of loans.
The Consumer Financial Protection Bureau (CFPB) previously filed a federal lawsuit against Corinthian over the falsified job placement statistics. In late Oct., a judge ruled against Corinthian, The HP reported. The ruling that the for-profit system violated a federal law was considered a precursor to the ED's current decision.
A little less than a month later, the Education and Justice Departments announced they had reached a settlement with another major for-profit education company, Education Management Corp. (EDMC). The company faced accusations its faculty were illegally incentivized to recruit prospective students. Unlike Corinthian, EDMC will stay open.
In fact, EDMC emphasized in its own statement that the settlement was not an admission of guilty, but a calculated move to settle a legal matter that was hindering its operations.
The ED is now expected to turn its attention to handling the approximate 125,000 student loan borrowers who are eligible for debt forgiveness. Students that will have their student debt cancelled are expected to be contacted starting Friday.
"[ED officials] are working as quickly as possible to process claims in a manner that is fair to students and taxpayers," Denise Horn, an ED spokeswoman, said in a statement. "[The ED] has been contacting and will continue to contact potentially impacted student borrowers to provide clear information about their options, including loan discharge applications, in addition to providing enhanced information on the department's website."
