Anyone who borrowed money to attend a school owned by Corinthian Colleges — a for-profit institution with a long history of defrauding students before its sudden closure in 2015 — will have their federal student loans forgiven.
The mass release is the largest amount of debt the federal government has erased in a single action benefiting more than half a million borrowers to the tune of $5.8 billion.
“While our actions today will relieve victims of Corinthian colleges of their burden, the Department of Education is actively stepping up oversight to better protect today’s students from the tactics and ensure that institutions for-profits — and the corporations that own them — never get away from such abuse again,” Education Secretary Miguel Cardona said.
Corinthian Colleges opened in 1995. Based in California but with campuses nationwide, colleges closed in 2015 after the Department of Education cut off the for-profit institution’s ability to access federal money. But borrowers who had attended college sometimes still struggled to get their loans discharged.
Corinthian College’s debt cancellation also comes as President Biden considers broader student loan cancellation, and payments on federal student loans remain frozen. This break should lift at the end of August.
About 41 million borrowers are benefiting from the break, and the Department of Education has estimated that it saves them around $5 billion a month.
Vice President Kamala Harris is expected to formally announce the debt cancellation Thursday at the Department of Education. She has a history with Corinthian Colleges.
As California state attorney general, Harris won a judgment against the institution that resulted in $1.1 billion in aid for former students. The initial complaint against the school alleged that it targeted poor Californians through advertisements and marketing campaigns that misrepresented the likelihood of students finding employment.
The Ministry of Education estimated that around 560,000 borrowers would benefit from the cancellation to the tune of nearly $6 billion. The cancellation comes through the Borrower Defense Program, a federal initiative that forgives debt for students who can prove they were defrauded by their schools.
Borrowers with debts associated with Corinthian colleges will not have to apply for the relief. And in some cases, they’ll get refunds for payments they’ve already made.
The agency previously announced changes to existing debt relief programs that the ministry said generated $18.5 billion for about 750,000 borrowers. The most extensive overhaul was that of the civil service loan forgiveness program, which benefited nearly 113,000 borrowers.
Borrower advocates welcomed the news, but questioned whether the department would write off the debts of other closed for-profit colleges.
“This action is long overdue, but we hope it will provide these borrowers with a fresh start and an opportunity to chart a course for a brighter and more secure financial future,” said Libby DeBlasio Webster, National Student Senior Counsel. Legal Defense Network, a borrower advocacy group. “We also hope that today’s news is a sign that more decisions are on the horizon for thousands of students in the same situation who are waiting for this kind of relief.”
The Debt Collective, a national group of organizers working to cancel student debt, also welcomed the announcement. This group had also led a “student debt strike” in 2015 made up of former Corinthian College students who said their degrees were fraudulent.
Debt Collective member Thomas Gokey said the defense borrower rule was relatively unknown until members of the group began seeking relief from the Department for Education.
One of the members of the original debt strikers – the group calls them the Corinthians 15 – Latonya Suggs, said in a press call on Wednesday afternoon that she was encouraged by the cancellation, but wanted it to cover all borrowers.
“I’m happy at the end of the day that our loans are paid off, but the battle is not over,” Suggs said. “There’s a lot more we need to do. And in the end, it took way too long.”