Victims of College Fraud to Receive Loan Relief


From a recent announcement it seems that significant progress has been made by the Department of Education in its review of claims made against the now defunct Corinthian College by students who took federal student loans so they could attend.

Misleading Recruiting Information

The federal government along with other authorities has been taking action against Corinthian College, which was one of the biggest for-profit higher education companies, for over a year now. This was on suspicion that it had misled the student body on issues including graduate job placement rates and credits transferability.

When the school was closed in April, a number of students still attending were immediately eligible to receive relief based on the long standing benefit on loan discharge for a closed school. However, a significant number of students had either already finished their qualification, or had already left the school before it has officially closed, were disqualified from this relief.

To circumvent this, the DoE invoked a two decade old, but never before used provision, called borrower defense to repayment. This provision provides relief to recipients of federal loans if they can prove they were defrauded by the school according to state law.

While there are no predetermined guidelines to help establish a student’s entitlement to this discharge, a consumer advocate has been tasked with reviewing the issue and setting up a system for evaluating and recovering funds from offending schools.

Broader Applicability

According to the review covering the issue, this provision could be used to help students from other schools who claim that they were defrauded by educational institutions. To make the entire process easier, the DoE has also announced that it is instigating a process for determining the official rules that would determine eligibility for a discharge. This discharge however, only applies to federal loans, and does not cover private ones.


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