The Consumer Financial Protection Bureau and 13 state attorney generals have reached a settlement agreement that will provide debt relief for 41,000 students who took out private loans to attend Corinthian College.
If the settlement is approved by the U.S. District Court of Oregon, students will receive $183 million from Aequitas Capital Management, an investment firm that funded the loans. The government had alleged that Aequitas and Corinthian officials knew they were offering high-interest loans to students who had a high likelihood of defaulting on the loans. Many of the students came from low income families and could not otherwise afford to pay for the tuition out of their own pockets.
Borrowers who were enrolled at a Corinthian school when in closed will be eligible to have their remaining debt forgiven. Those who are currently in default on their loan will be eligible to have their loans forgiven as well. Former students with Genesis loans will be eligible to for as much as a 55% debt reduction on their outstanding principal amounts. Overall, the average borrower will receive between $6,000 and $7,000 in debt relief under the terms of the settlement.
Before it closed in 2015 as part of a crackdown by the Obama administration, Corinthian was one of the largest for-profit colleges in the country with about 74,000 students. It operated more than 100 campuses under a variety of names, offering career programs such as criminal justice and information technology. In 2015, the government fined Corinthian $30 million for misleading prospective students about job placement rates for graduates. Due to the negative publicity, enrollment dropped dramatically, and Corinthian sold of some colleges to Zenith Education Group. However, the action was not enough and on April 27, 2015, Corinthian abruptly closed its remaining campuses.
Earlier this year, a San Francisco judge also ruled that the advertising practices of Corinthian Colleges were illegal and misled students. As a result, California Attorney General Kamala Harris was awarded a judgment of more than $1.1 billion in her suit against the for-profit operator.
Once the settlement is approved by the court, borrowers impacted by the settlement should be notified within 90 days.
For an overview of government student loan forgiveness programs, check out Student Loan Forgiveness page.