Former Corinthian students’ loan debts canceled

Students defrauded by the defunct Corinthian Colleges Inc., will share $5.8 billion in refunds, the nation’s largest student loan erasure, the U.S. Education Department announced Wednesday.

The loan discharge is expected to benefit more than half a million former students of the for-profit colleges run by Corinthian Inc., a company that shut down in 2015 after a federal investigation concluded it enticed students with falsified job-placement data and failed to address allegations that it altered grades and attendance records.

Borrowers who have not applied to have their loan discharged under the federal borrower defense program will still have their Corinthian loans forgiven “without any additional action on their part,” the department said.

“For far too long, Corinthian engaged in the wholesale financial exploitation of students, misleading them into taking on more and more debt to pay for promises they would never keep,” U.S. Secretary of Education Miguel Cardona said in a statement.

Vice President Kamala Harris, then California’s attorney general, sued Corinthian in 2013, leading to a $1.1 billion judgment against the bankrupt company in 2016.

Nearly 35,000 California students had borrowed private money to attend Corinthian’s for-profit career-training colleges Everest, Heald and WyoTech in the state, which the bankrupt company sold off in 2015.

Three years later, then-state Attorney General Xavier Becerra announced in San Francisco that those 34,971 former students would have their loans forgiven.

On Wednesday, Student Defense, a national legal defense organization that represents borrowers, applauded the education department’s announcement.

“This action is long overdue, but we hope it provides these borrowers with a fresh start and an opportunity to chart a path towards a brighter, more secure financial future,” Libby DeBlasio Webster, the organization’s senior counsel, said in a statement.