Debt wiped for Corinthian students as bigger decisions loom
WASHINGTON >> As college graduates wait to see whether President Joe Biden will wipe out some of their student loan debt, his administration is taking a more limited step to address a fraud scandal at Corinthian Colleges, a forprofit chain that collapsed nearly a decade ago.
Anyone who enrolled in the company's schools will have his or her federal student debt erased, clearing away $5.8 billion for more than 560,000 borrowers — the largest single loan discharge ever, according to the Education Department.
Vice President Kamala Harris on Thursday called it a milestone in “a journey for justice for everyone who was defrauded” and will “put real money in the pockets of real people.” She made only a brief reference to lingering questions about the next steps on student loan debt. “As a nation, we have a lot more work to do on these issues,” she said.
Biden, as a candidate, promised to address the matter if elected, and he has expressed interest in canceling $10,000 per borrower. There's been no word on how Biden will handle the issue, even with pressure building on him. The White House has suggested there would be some kind of income criteria that would prevent high earners from benefiting.
Debt payments were paused by President Donald Trump near the beginning of the coronavirus pandemic, and Biden has kept the freeze in place while considering a more permanent solution.
Any decision carries political risks. Republicans accuse Biden of plotting an election-year giveaway. Activists are pushing him to cancel at least $50,000 per borrower, and anything less could disappoint them.
“President Biden, canceling $10,000 in student debt is like pouring a bucket of ice water on a forest fire,” NAACP President Derrick Johnson said in a statement. Black students and other students of color are more likely to take out loans to pay for college.
The announcement about Corinthian, which operated from 1995 to 2015, seeks to close the books on one of the most notorious cases of fraud in American higher education. At its peak, Corinthian was one of the largest for-profit college companies, with more than 100 campuses and more than 110,000 students at its Everest, WyoTech and Heald schools.
When Harris was California's attorney general, she worked with the Obama administration to uncover how campuses were falsifying data on the success of their graduates. In some cases, schools reported that students had found jobs in their fields of study even though they were working at grocery stores or fast food chains.
Students told investigators they were often pressured to enroll with promises of lucrative employment, only to end up with huge sums of debt and few job prospects. Federal officials found that the company falsely told students their course credits could be transferred to other colleges.
Harris said Corinthian tried to attract students who were single parents or unemployed and looking to improve their lives.
“The company believed they could get away with it because, as predators are wont to do, they targeted people who they assumed wouldn't fight back,” she said.
Tens of thousands of former Corinthian students were already eligible for debt cancellation, but they had to file paperwork and navigate an application process that advocates say is confusing. Now, the relief will be made automatic and extended to additional borrowers.
Those with a remaining balance on their Corinthian debt will also get refunds on payments already made, department officials said. But the action does not apply to loans paid in full. A spokesperson for the Education Department did not respond to a question about why that decision was made.