Former Corinthian college students await loan relief: U.S. states

WASHINGTON (Reuters) - The U.S. Education Department has left thousands of student-loan borrowers who were defrauded by Corinthian Colleges Inc in limbo by prolonging a process created by the Obama administration that was supposed to speedily cancel their debts, according to 20 state attorneys general and regulators.

In the final months that President Barack Obama, a Democrat, was in office the department finalized a regulation easing the way for students from struggling for-profit colleges such as Corinthian and ITT Tech to quickly receive debt relief that they were entitled to by law.

In a letter sent on Monday to U.S. Education Secretary Betsy DeVos, the state attorneys general said they were concerned about growing backlogs of applications for the relief and of loans approved for discharge that simply need a sign-off. The letter, signed by the top lawyers of Illinois, California, Massachusetts and other states, was released on Tuesday.

They said they were particularly troubled that some borrowers had been notified their loans were eligible for fast discharge under the regulation but that the cancellation has not yet happened. According to the letter, the Department stated in January it had notified 23,000 borrowers that their loan forgiveness should be complete within the 60 to 120 days, but in many cases loans have not been canceled.

That means some of Corinthian's students could still be on the hook for monthly payments or possibly face debt collection.

Work on discharging loans that have been approved is underway, according to Education Department Press Secretary Liz Hill.

"We are working with servicers to get these loans discharged as expeditiously as possible," Hill said in a statement. "Some borrowers should expect to obtain discharges within the next few weeks."

Virginia Attorney General Mark Herring said about 5,000 past Corinthian students in the state received letters last December directing to apply on-line for relief. Since then, his office has received queries about delays in the process.

"Delay in canceling this debt, especially for students who have already been approved, could put even greater financial strain on students in Virginia and around the country," he said in a statement.

Amid federal and state investigations in 2015 into its post-graduation rates, for-profit Corinthian filed for bankruptcy and abruptly closed its 28 schools.

(Reporting by Lisa Lambert; editing by Diane Craft)