Over a month ago, the Education Department announced that it would “forgive loans” taken out by 500,000 students of Corinthian, a sprawling network of for-profit colleges. Corinthian had lured students with false hopes of career training and an entryway into the middle class, but only gave them substandard educations, worthless diplomas, no resources for employment, and tens of thousands of dollars in debt.
Do the new promises of relief from the Education Department hold up any better than the old promises made by Corinthian Colleges? So far, just a handful of students have seen their loans forgiven, despite a supposedly streamlined process. In fact, the Education Department appears to be placing barriers to access to loan forgiveness, like insurance companies discouraging unhealthy customers by situating their headquarters on the 8th floor of a building with no elevator.
There is a very precise profile of a Corinthian student, according to Peter Dellinger, a lawyer for the Empire Justice Center in New York, a civil legal aid outfit assisting former students who attended Corinthian’s Everest Institute campus in Rochester, New York. “We represent 15 people,” Dellinger said. “They’re all women. Most of them are mothers. Almost all of them got GEDs. All of them were promised a career.”
These are not people with the skills to act as a lawyer or private investigator. Yet that’s what the Education Department’s loan forgiveness process demands. Students whose schools shut down are eligible to have their loans forgiven, as long as they forfeit the possibility of using credits achieved there in a transfer. But under language in student loan contracts called “defense to repayment,” students who take out loans to attend colleges that defraud them can apply to have those loans cancelled. The Education Department and multiple state investigations have documented this fraud painstakingly, even fining Corinthian, which is now bankrupt, for its actions.
However, students seeking relief must re-prove the fraud themselves, in a needlessly bureaucratic application process that requires them to provide transcripts of their college activity and identify specific state legal statutes violated by their school. Even the easy part of this, the transcripts, has proven difficult: For Corinthian campuses that have closed down, including the Everest Institute in Rochester, there’s nowhere to go to access transcripts.
As for the rest, “It would be very challenging for a lawyer to do this, much less someone attending Everest,” said Peter Dellinger of Empire Justice Center. Making sure that the proper state law violation applies is a virtually impossible task for someone with no legal training. And neither students nor their lawyers can subpoena closed schools or their bankrupt parent company to prove fraud. Civil legal aid attorneys like Dellinger have tried to help, but they don’t have the resources to reach everyone needing assistance.
The Education Department did offer blanket relief to students who took certain courses at Heald College, a division of Corinthian that was fined $30 million for inflating job placement statistics. Heald students only have to fill out an attestation form to get their loans forgiven. But unbelievably, the fillable version of the form has been broken on smartphones, browsers and non-Adobe PDF viewers for close to two months, including yesterday when I checked it. There is a plain-text version, but completing it requires students to print it out.
This sounds like a minor hurdle, but it’s actually fairly significant. “The Everest students I know, the only computers they had to access were at the school,” Dellinger said. So even a simple form that requires a computer and printer leaves lots of students behind. “That doesn't do any good,” Dellinger added. “They all have smartphones. They really ought to make an app.”
As a result of these difficulties, only 180 of the estimated 40,000 eligible Heald students have filled out the form. Overall, the Education Department has received 6,000 applications for loan forgiveness, mostly from students whose campus shut down. They have granted less than 500, likely all for closed-school discharges, where the rules are rather clear. I have not heard of a single student attempting defense to repayment who has actually been awarded loan forgiveness.
The Education Department has a clear conflict of interest here. The more students who successfully receive loan forgiveness, the more money the department must give up on their federal loans. Officials don’t want to admit the mistakes they made in allowing Corinthian to defraud students for so long. They are both the chief regulator for for-profit colleges like Corinthian and their chief banker. So they have predictably slow-walked the process and ignored the simplest steps that would make it more effective.
It took a bankruptcy judge to force the Education Department to even e-mail Heald students about the potential for loan relief, but the department has yet to mail a hard-copy form to every eligible student, instead relying on the digital divide to cut down the number of loans it has to forgive. It hasn’t mailed all 500,000 Corinthian students about their eligibility to apply for defense to repayment, either. The allegedly independent monitor of the debt cancellation process, Joseph Smith, has a history of being asleep at the switch while monitoring.
The bankruptcy judge also persuaded the Education Department to stop debt collection efforts in courts on defaulted ex-Corinthian students until November. However, debt collectors can still contact students in default, and their credit scores will still suffer. So students still risk having their financial futures compromised by the same federal agency claiming to offer them relief.
Over 200 students have now refused to pay loans incurred at Corinthian because of the fraud committed against them. Volunteers with the Debt Collective, an Occupy Wall Street offshoot that has been organizing the student strike, built a tool allowing students to apply for defense to repayment on their smartphones, essentially doing the Education Department’s job for them. Debt Collective also infiltrated a conference of financial aid advisers in New Orleans this week, winning an award for innovation with their call to make higher education tuition-free. In California, lawmakers are debating whether to automatically waive community college fees and provide other benefits for former Corinthian students.
But the Education Department seems more concerned with limiting the help officials speaking at big news conferences pretend to be providing. “These are poor kids,” said lawyer Dellinger. “Is the Education Department that forked over billions willing to say ‘we made a mistake?’ That’s a pretty big error to admit to.”
This article has been updated to correct the identification of Peter Dellinger and the Empire Justice Center.