Secretary of Education Arne Duncan has announced that the Education Department would be forgiving the federal student loans of the thousands of students who attended for-profit Corinthian Colleges which recently closed and filed for bankruptcy.
Duncan added that the Department would be working on a process so that all students across the country would be able to have their loans forgiven if they felt they had been defrauded by their college. A special master will be appointed within the month who will be in charge of the creation of a procedure to apply for such loan forgiveness that is “durable, not just for Corinthian but beyond.”
Those students who have already transferred or have plans to transfer their credits to another institution in order to complete their course of study would not be eligible for the loan forgiveness option, reports Elisha Fieldstadt for NBC News.
However, the changes come with a hefty price tag for taxpayers, as this is the first time the government has forgiven the loans of such a large amount of students. Estimates from the department suggest that if all 350,000 students who attended Corinthian over the last five years apply for and receive debt relief, it could cost as much as $3.5 billion, writes Tamar Lewin for The New York Times.
“You’d have to be made of stone not to feel for these students,” he said. “Some of these schools have brought the ethics of payday lending into higher education.” Duncan added, “This is our first major action on this but obviously it won’t be the last.”
Duncan went on to say that he would make it his priority to ensure that students who had been defrauded by their college received all the relief they could under the law.
“We will make this process as easy as possible for them, including by considering claims in groups wherever possible, and hold institutions accountable,” he said.
While some supported the changes, saying that students deserved such relief from their debt, others were not in agreement, arguing that taxpayers should not be held accountable for the actions of a college. Senator Lamar Alexander added, “If your car is a lemon you don’t sue the bank that made the auto loan; you sue the car company.”
Meanwhile, a number of advocacy groups feel that the department should be doing more in terms of debt relief for students, suggesting that some form of blanket relief should have been offered.
Federal law offers students the right to debt relief if they were enrolled at the time the college closed, or within 120 days of the shutdown. The department has changed this rule for Heald students, extending the period of time covered to go back to June 2014 when an agreement between the Department and Corinthian had been reached to sell the various campuses.
It is estimated that around 40,000 Heald students will be eligible for debt relief, totaling $544 million. Department officials noted that previously only 6% of students who attended colleges that closed asked for loan forgiveness.