Corinthian students will get loan break
WASHINGTON – A federal regulator said Corinthian College students will be forgiven a total of $480 million in loans because the for-profit school used “bogus” job prospects to persuade them to pay tuition with expensive private loans.
The Consumer Financial Protection Bureau said tens of thousands of students received the loans, though it’s unclear how many will benefit from the forgiveness. More than 60 percent of Corinthian students with those loans defaulted within three years after being subject to interest rates that were roughly twice the rates for federal loans.
“These consumers were lured into high-cost loans destined to default and then targeted with aggressive debt collection tactics,” CFPB Director Richard Cordray said.
He said the loan forgiveness should help current and former students.
The troubled loans led the CFPB to file suit in September against Corinthian, which has operated a network of campuses under different names around the United States and Canada. The debt forgiveness deal announced Tuesday releases the new owners of Corinthian’s Everest and WyoTech campuses, ECMC Group, from potential liabilities for the “alleged illegal activity.”
With the deal in place, ECMC Group finalized its acquisition of more than 50 campuses formerly run by Corinthian that enroll nearly 30,000 students.
“Today, we begin delivering on our promise to transform the Everest and WyoTech schools we have acquired into first-rate career colleges where success is measured not by how many students we enroll, but by how many students complete their programs and get fulfilling jobs when they graduate,” said David Hawn, president and CEO of ECMC Group, based in Oakdale, Minnesota.
The CFPB and the federal Education Department worked with the new owner to give eligible students an immediate 40 percent reduction on their outstanding private student loans and removed negative information from their credit reports. ECMC Group will also refrain from operating a private student loan program for seven years.
The CFPB intends to provide full relief to Corinthian borrowers who relied on the private loans.