Education Dept. Is Sued Over Debt Collection From Former Corinthian Students

A former student of the defunct Corinthian Colleges Inc. is suing the U.S. Education Department to ”halt the certification of all Corinthian-related debts,” as a U.S. senator wrote to the department asking why it was collecting such debts.

Sen. Elizabeth A. Warren, a Massachusetts Democrat, sent a letter to the department on Thursday, arguing that it was collecting on loans owed by former students of the for-profit educator despite having promised to forgive those debts.

Corinthian went bankrupt in April 2015 and closed following years of accusations of fraud and misconduct, and enhanced scrutiny by the department. A month later, the department announced that some former students who had taken out loans to attend would be eligible for debt relief under a “borrower defense” discharge program. In March 2016 officials increased the number of students eligible to have their loans relieved.

But, Ms. Warren’s letter says, of the almost 80,000 eligible former students, fewer than 4,000 have had their loans forgiven. In fact, 30,000 are being “hounded by the department’s debt collectors,” she wrote.

Darnell E. Williams, the former Corinthian student who filed the lawsuit, makes similar allegations of inappropriate debt collection. He borrowed about $10,000 to attend one of Corinthian’s colleges in 2011, the lawsuit claims, and has since defaulted on his federal student loans. The lawsuit seeks to alleviate Mr. Williams’s debt as well as to “halt the certification of all Corinthian-related debts” and to restore “the amounts previously seized through offset.”

Mr. Williams is being represented in the case by Harvard Law School’s Project on Predatory Student Lending.

“We share Senator Warren’s commitment to former Corinthian students,” said Ted Mitchell, the under secretary of education, in a written statement. “Since Corinthian’s closure, we’ve conducted ongoing, extensive direct outreach to Corinthian borrowers who may be eligible for debt relief through the closed-school loan-discharge program or defense-to-repayment claims. This fall we will build upon that outreach, including through a targeted effort to reach Corinthian borrowers who have loans in collections or subject to Treasury tax offsets or wage garnishment.”

As of June, the department reported more than 26,000 claims for debt relief, about 90 percent of which were from former Corinthian students.

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