Justice—and relief—for defrauded Corinthian students

After years of enduring fraud, students who were bilked out of billions of dollars in student loan money are finally getting some measure of justice. On June 1, the U.S. Department of Education announced it will discharge all remaining federal student loan debt for students who attended Corinthian Colleges; they will not have to pay back the student loans they took out to attend. In all, 560,000 people will receive a total of $5.8 billion in full loan discharges.

It’s been a long road, but patience and a lot of advocacy have literally paid off.

Corinthian Colleges—including Everest, Heald College and WyoTech—were infamous for falsely advertising a great education and even greater careers, then delivering inadequate, expensive “education” to students who took out substantial student loans to pay for it and were left with mountains of student debt. When Corinthian closed in 2015, it seemed former students had little recourse.

Corinthian College

They fought back anyway, and the AFT joined them. Some filed lawsuits. Others testified in Congress and lobbied their elected officials. Fifteen of the students became part of the Debt Collective, an outgrowth of Occupy Wall Street; they went on strike, refusing to pay their student loans and invoking a then-obscure policy, “borrower defense,” that protects people from fraud. It was a bold move: Normally disenfranchised people, most of them working class people of color, took a substantial risk to call attention to injustice, and many credit “the Corinthian 15” for shining a light on the issue.

Another key player in the fight against for-profits was Kamala Harris: In 2013, when she was California attorney general, she sued Corinthian for misrepresenting job placement rates and deceiving potential students with false advertising and recruitment. That set off additional inquiries.

Eventually Corinthian was shuttered. Some borrowers applied to have their debt discharged through the borrower defense system unearthed by the Corinthian 15, but the application process was complicated and long.

The new ruling makes all that unnecessary: Debt cancellation associated with Corinthian will now be automatic, beginning this summer. And it covers students who attended Corinthian from its inception in 1995 until it folded in 2015.

“This is a day of joy for the hundreds of thousands of borrowers who entrusted Corinthian Colleges with their future but instead were preyed upon, duped and defrauded by fake promises of jobs and a better life,” says AFT President Randi Weingarten. “It’s a momentous victory for the activists and AFT members who organized and mobilized for years to demand Corinthian be held to account.”

Weingarten points out that the AFT demanded full cancellation of Corinthian debt in 2016, but then-Education Secretary Betsy DeVos “shamefully ignored” that call, instead propping up the for-profit colleges that had harmed these students.

The problem was made worse by its magnitude: A full 70 percent of the students who attend for-profit colleges take out loans, and the programs cost about $10,000 more than public community colleges, so loan amounts climb quickly. Borrowers are often unable to pay back the loans because the colleges did not prepare them for any sort of decent-paying job; they didn’t even reach the standards required to transfer credits to a legitimate institution. Although they enroll just 10 percent of students, for-profit colleges are responsible for half of all student-loan defaults.

The Corinthian loan relief announcement is tremendous news for former Corinthian students, but it is also good news for student debt policy, which has been shifting since 2020. “Today we are reminded again that elections have consequences, and that the Biden-Harris administration is leading on the issue of student debt,” says Weingarten. “The vice president has led on this issue from the beginning, and we are confident a new wave of relief will further reduce the horrendous mountain of debt holding back far too many Americans.”

Weingarten notes important changes to the federal Public Service Loan Forgiveness program, which was so broken that just 2 percent of applications for loan relief were approved. The program, which was supposed to relieve the loans of public service workers who have made payments on their loans for 10 years, is now functioning, thanks to advocates like the AFT (and the AFT’s lawsuit against DeVos’ Education Department). A temporary waiver of some qualifying requirements has allowed thousands of borrowers who have been mired in debt the relief they were promised—$6.2 billion thus far.

The AFT is also advocating for broader debt relief that would apply to people who don’t happen to be public service workers, so that more people will have access to debt relief.

The Corinthian win is momentous, but it is not the end of the fight against rogue for-profit colleges. Many continue to cheat students out of their student loan money, enriching their leaders even as they masquerade as “nonprofits.” Additional policy could address that, and so the student debt fight continues, one battle, and one victory, at a time.

[Virginia Myers]