Debt collectors are pursuing payments from people who attended a for-profit college that went bankrupt after numerous fraud-related lawsuits, despite the Department of Education promising them avenues for debt relief.
Only 5 percent of the 80,000 former students of Corinthian Colleges who are eligible for debt discharge under department programs formulated since 2015 have been granted that right, according to an investigation by the staff of Sen. Elizabeth Warren (D-Mass.).
Of those 76,000 people being pursued for Corinthian-related obligations, over 30,000 have seen government benefits taken from them. More than 4,000, meanwhile, have had wages garnished as a result of their debt.
In June, the Department of Education set up a process that allowed Corinthian students to apply to be discharges of their debt obligations. The scheme was established under arcane federal rules that allow the department to unilaterally cancel financial obligations, when federally-funded student loans go to schools that ripped off enrollees.
The plan also came more than a year after the department promised to “fast-track” relief for Corinthian students.
Corinthian Colleges went bankrupt in 2015.
As Warren noted in a letter sent Thursday to Secretary of Education John King, the school had faced fraud-related lawsuits from state Attorneys General and the Consumer Financial Protection Bureau “for years before its collapse.”
She blasted King for not being active in granting relief, under existing authorities.
“Unfortunately, to date, the Department has chosen to operate a complex, resource intensive, unnecessary and baffling scheme to parcel out relief on a student-by-student basis,” she said.
The department’s scheme, Warren said, has forced “victims to affirmatively apply for the relief they are entitled to under the law and insisting on its own separate findings of fraud despite clear evidence of wrongdoing from other state and federal authorities.”
In a press release, the senator’s staff also noted that less than a third of Corinthian borrowers have applied for relief under the program offered by the Department of Education, “suggesting a failure in the effort to inform students of their rights to a discharge.”
