NCLC Advocates Applaud Department of Education’s Step Towards Granting Widespread Student Debt Relief to Corinthian Borrowers
Over the past year, the National Consumer Law Center has called on the U.S. Department of Education to cancel the student loans of all borrowers harmed by the predatory and illegal practices of Corinthian Colleges. NCLC advocates applaud today’s announcement from the Department as a step in the right direction.
The Department has announced that it will:
- Extend closed school loan discharge eligibility to Corinthian borrowers who withdrew from a closed school on or after June 20, 2014.
- Grant loan cancellations and refunds to borrowers who enrolled in a Heald College campus and program for the time frames. Borrowers, however, must use an application to apply for relief.
- Provide loan forbearance and suspend collection on loans for Corinthian borrowers who have applied for relief based on their schools’ state law violations (called “Defense to Repayment”) or who intend on applying for this relief within 12 months. To request forbearance, students may call (855) 279-6207 or submit an online request.
- For borrowers not included in the above groups, appoint a Special Master to develop a system that will allow borrowers to assert a Defense to Repayment, including non-Corinthian borrowers. For Corinthian borrowers, this will include a “simple” application form and possible relief for groups of borrowers based on the evidence of “appropriate authorities.”
While we praise the Department’s first step, we continue to have a number of questions and concerns, including:
Lack of Automatic Relief: Although the Department could identify and grant automatic relief to all Heald College and closed school borrowers, it has instead decided to require that borrowers apply. This is disappointing. The Department has acknowledged that historically only 6% of eligible borrowers contact the Department about closed school loan discharges. How will the Department ensure students know about their eligibility and apply?
Need for Accurate Borrower Assistance: While encouraging volunteers to provide assistance is important, they must be well-trained and have access to experts who can help them answer complicated student loan questions. In addition, both of the following are essential for ensuring that all eligible Corinthian borrowers are able to obtain relief:
1) Adequately funded legal assistance: The options now available to Corinthian students are complex. The eligibility requirements, closed school discharge forms, documentation requirements, and possible pitfalls remain both daunting and confusing. This highlights the need for accurate legal advice and guidance for thousands of Corinthian borrowers throughout the country.
2) Clear guidance and oversight of loan servicers: Loan servicers will be the first call for most borrowers and will continue to receive loan discharge and Defense to Repayment applications. As we previously described in a letter to the Department, in some cases loan servicers are providing incorrect information to borrowers. The Department must improve its oversight of loan servicers and ensure that they are providing accurate information, presenting borrowers with all of their options and properly evaluating loan relief applications.
Heald College Relief Limited to Post July 1, 2010: This leaves borrowers who enrolled in the short window between November 2009, when Corinthian bought Heald Colleges, and July 1, 2010, on the hook for their federal loans. Does the Department have any intention of providing similar relief to these borrowers?
No Answers for Remaining Borrowers: We continue to urge the Department to provide widespread debt relief to all harmed Corinthian borrowers through a fair and efficient system, which will be created by the Special Master. At a minimum this system must provide automatic group relief for borrowers covered by government agency findings of state law violations. For other borrowers, the system must be accessible and simple, without any burdensome individualized evidentiary requirements.
Given that other large for-profit school chains may close in the near future, we hope the Department will move quickly to appoint a Special Master, create a fair Defense to Repayment process, improve its oversight of and provide more guidance to loan servicers, and provide sufficient funds for widespread legal assistance for eligible borrowers.
