Corinthian Colleges, a now-defunct for-profit chain, shut down its remaining campuses, including the Everest Institutes, in 2015. Many former students are petitioning the federal government to grant them relief.
After months of delay, the Education Department is rolling out a new wave of rulings on claims submitted by former students at Corinthian Colleges who said they should be relieved of repaying their federal student loans because the now-defunct chain of for-profit colleges had defrauded them.
The department announced on Wednesday that it had approved 12,900 borrower-defense claims, as they are known. It also denied 8,600 claims, many of which were presorted for denial during the Obama administration, according to two department officials. These are the first new approvals since the Trump administration took office.
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Corinthian Colleges, a now-defunct for-profit chain, shut down its remaining campuses, including the Everest Institutes, in 2015. Many former students are petitioning the federal government to grant them relief.
After months of delay, the Education Department is rolling out a new wave of rulings on claims submitted by former students at Corinthian Colleges who said they should be relieved of repaying their federal student loans because the now-defunct chain of for-profit colleges had defrauded them.
The department announced on Wednesday that it had approved 12,900 borrower-defense claims, as they are known. It also denied 8,600 claims, many of which were presorted for denial during the Obama administration, according to two department officials. These are the first new approvals since the Trump administration took office.
Earlier this year multiple news outlets reported that the department was exploring the option of granting partial relief to such borrowers, and on Wednesday the department described its guidelines for how it will grant relief. The education secretary, Betsy DeVos, has criticized how the claims were previously handled, infamously likening the process to “free money.”
Under the previous rules, when borrowers were found to have been defrauded, they were automatically granted full relief. That regulation is now undergoing a rule-making process to be rewritten.
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The Trump administration did not make any changes in how claims are approved, but it established several percentage levels of relief based on the earnings of the person filing the claim.
If borrowers earn less than 50 percent of what graduates of a comparable program do, according to earnings data collected under the gainful-employment rule, they will be granted full relief. After that, the department will grant partial relief on a sliding scale:
“We have been working to get this right for students since Day 1,” said Ms. DeVos in a written statement.
“No fraud is acceptable, and students deserve relief if the school they attended acted dishonestly. This improved process will allow claims to be adjudicated quickly and harmed students to be treated fairly,” she continued. “It also protects taxpayers from being forced to shoulder massive costs that may be unjustified.” The department will also apply a credit to interest that accrues on loans starting one year after a claim has been filed.
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Critics disagreed that the new framework for relief would be an effective or fair way to resolve claims.
“Whether a student was able to get gainful employment by other means shouldn’t bear on the fact that a lot of them were treated similarly,” said Reid Setzer, government-affairs director at Young Invincibles, an advocacy group. “So when you’re going to single out those who succeeded and deny them full relief because of their success, I don’t think that’s the right approach.”
Ben Miller, senior director for postsecondary education at the Center for American Progress, a liberal think tank, said the new direction would not only be unfair to students who had succeeded despite being defrauded; it would also unfairly penalize students whose classmates had had their claims approved and received full relief, he said.
How relief is granted, he said, should depend on when a claim was filed.
Adam Harris, a staff writer at The Atlantic, was previously a reporter at The Chronicle of Higher Education and covered federal education policy and historically Black colleges and universities. He also worked at ProPublica.
