Government

U.S. Has Forgiven Loans of More Than 3,000 Ex-Corinthian Students

September 03, 2015

More than 3,000 borrowers who attended closed Corinthian campuses have had their student loans forgiven by the U.S. Department of Education to date, at a cost of $40 million to taxpayers, according to a report released on Thursday by Joseph A. Smith, the "special master" overseeing the discharges. Thousands more are in line for debt relief.

To date, almost 8,000 students who attended now-shuttered campuses of the defunct career-college system have applied to have their debts forgiven. And 4,140 students at Corinthian Colleges Inc. and other colleges have filed "borrower defense" claims seeking to have their debts discharged on the grounds that they had been defrauded by the institutions.

To handle the influx of fraud claims, the department has hired four additional lawyers who will start work after Labor Day, according to the report. Their first priority will be the almost 2,000 claimants from Heald College, one of Corinthian’s larger properties. Borrowers who attended Heald have already been promised discharges on the basis of the department’s finding that the college misrepresented its job-placement rates.

"Right now, we’re focusing on where the big numbers are, and we have not paid a lot of attention, candidly, to the others," Mr. Smith told reporters in a call on Thursday.

Once the Heald claims are processed, the department will turn to the others, considering them in batches whenever possible. As the department gains experience in reviewing cases, Mr. Smith will develop a "set of rules for deciding cases in a consistent way," according to the report.

Borrowers seeking to have their debts forgiven under a "defense to repayment" claim must show that their institution had violated state law. That requirement has led to concerns among some advocates for the students that borrowers in states with aggressive attorneys general — like Massachusetts and California — could have an easier time qualifying for forgiveness than borrowers in states that have not taken action against colleges.

Asked if he worried that borrowers with similar claims might not be treated "equitably," Mr. Smith said, "Yes, I am concerned."

"I’m being careful about determining classes and making sure that like classes get the same outcomes," he said on the call. "I’m going to use every erg of intellectual energy to find ways to ensure the result we want — which is to have like claims treated alike."

Ted Mitchell, the under secretary of education, said equity concerns were "one of the key reasons" the department had begun a rule-making process to clarify how borrowers who believe they were defrauded can have their debts forgiven.

"There is a fundamental inequity in basing this around state laws, and we’re going to be looking for ways to remedy this as we regulate," he said.

Kelly Field is a senior reporter covering federal higher-education policy. Contact her at kelly.field@chronicle.com. Or follow her on Twitter @kfieldCHE.