Last summer, we raised concerns regarding the proposed sale of Corinthian Colleges to ECMC, urged the Department to provide federal debt relief for current and past Corinthian students, and provided information about student rights and options. Yesterday, the Department announced that it had approved the sale of 53 of 56 Corinthian campuses to ECMC. We continue to have serious concerns.
Where does this sale leave Corinthian students harmed by Corinthian’s illegal practices? Here are some answers – and more questions.
Little in Federal Student Loan Relief: The sale terms provide some consumer protections for future students, including a ban on mandatory arbitration clauses. But the deal provides too little federal loan relief for current and past students:
- Past Students: So far, the Department has not agreed to cancel any federal loans for former students.
- Current Students: ECMC will offer approximately 40% of students enrolled in certain programs a choice between finishing their programs, receiving a voucher, or opting for a full refund. ECMC (through its new education subsidiary Zenith), however, will present these options to students, leaving them vulnerable to being pressured into the option that is most beneficial to ECMC.
- Current Students: The other 60% of students at the sale schools must finish out their programs. Although they may choose to withdraw, these students may or may not be entitled to a refund.
- Students at Closing Schools: ECMC plans on teaching out 12 schools by the end of August 2015. These students will not qualify for closed school discharges of their federal loans.
- California and Heald Students: These campuses are still for sale.
$480 Million in Private Student Loan Relief: We applaud the Consumer Financial Protection Bureau’s decision to stand by students who may have been harmed by Corinthian’s alleged predatory lending scheme. The CFPB has secured $480 million in debt relief for students who borrowed private loans from Corinthian (called Genesis Loans) as follows:
- Borrowers will receive a 40% reduction on their principal balances. The CFPB states that loan servicers will notify borrowers who qualify for this relief.
- ECMC has agreed to ensure that borrowers will not be sued or threatened with legal action if they fail to repay their Genesis Loans.
- All current negative information concerning Genesis Loans will be deleted from borrowers’ credit histories. However, the CFPB warns that borrowers must make on-time payments towards the remaining balances, otherwise negative credit information is likely to be reported in the future.
Although this relief is good news for borrowers, we still have concerns and ask that, in light of its stated commitment to transparency, ECMC provide additional details. Will these borrowers, many of whom have viable state law causes of action against Corinthian for illegal practices, be granted a 100% debt reduction? Or, will the current Genesis Loan holders demand that borrowers make steep and unaffordable monthly payments?
While it is important to examine the details of this sale, we must not forget the bigger picture. Our system of for-profit school oversight is broken. Students are at the mercy of unscrupulous for-profit schools like Corinthian because the Department and state oversight agencies have turned a blind eye to their predatory practices. As it stands now, when a large school like Corinthian implodes, it is the students who pay. This is unacceptable.
