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Home›Education News›Obama to cancel student debt to defrauded for-profits

Obama to cancel student debt to defrauded for-profits

By Matthew Lynch
December 11, 2015
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According to a government report released earlier in December, the U.S. Department of Education will cancel $27.8 million in federal student loans owed to the for-profit school chain Corinthian Colleges Inc by more than 1,300 former students. It was determined that the students were tricked into taking on the debt.

The Huffington Post tell us that this instance is the latest use of a rarely-utilized provision in the federal law that provides student debtors the right to petition the Education Department to release their debt. The debt may be released only in situations where the students were swindled into taking out loans.

The debt forgivement plan affects 1 percent of the roughly 125,000 student debtors who are eligible for expedited debt cancellation. That comes to around 2 percent of the students’ nearly $1.3 billion in combined loan balances. The U.S. Departments of Education said in June and November that those borrowers were eligible for instant loan relief upon determining that Corinthian had probably defrauded past students by sharing fictitious job placement rates.

Education Department spokeswoman, Denise Horn, said in a statement that department officials “are working as quickly as possible to process claims in a manner that is fair to students and taxpayers.” She also said the department’s Federal Student Aid office “has been contacting and will continue to contact potentially impacted student borrowers to provide clean information about their options, including loan discharge applications, in addition to providing enhanced information on the department’s website.”

Corinthian once operated at least 120 schools with approximately 110,000 students across North America. The for-profit schools under the Everest, Wyotech, and Heald brands filed for bankruptcy in May.


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