U.S. Students Granted Up To $3.5 Billion In Debt Relief

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U.S. Students Granted Up To $3.5 Billion In Debt Relief

It’s an unprecedented move in higher education, but a welcome one. The U.S. Secretary of Education has pledged to forgive the loans of as many as 350 thousand students who were defrauded into taking on huge student loan debts by online schools owned by Corinthian Colleges. More students may also be eligible.

In the New York Times, Tamar Lewin writes:

In a move against what he called “the ethics of payday lending” in higher education, Secretary of Education Arne Duncan announced Monday that the Education Department would forgive the federal loans of tens of thousands of students who attended Corinthian Colleges, a for-profit college company that closed and filed for bankruptcy last month, amid widespread charges of fraud.

Mr. Duncan also said the department planned to develop a process to allow any student — whether from Corinthian or elsewhere — to be forgiven their loans if they had been defrauded by their colleges.

A special master would be appointed within three weeks, department officials said, to create procedures to apply for relief that are “durable, not just for Corinthian but beyond.”

If all the debts of every Corinthian student are forgiven, the final tally of debt relief would be $3.5 billion. Of course, this assumes that every student applies for debt relief, a process which could prove difficult.

Still, it’s a step forward. Duncan’s announcement was in part a response to careful organizing by students and activists — many associated with the student debt strike movement and the Debt Collective. The students in question were given fake statistics about their colleges’ job placement rates, promised help with job searches that never materialized, and wound up broke and jobless with useless degrees that had cost upwards of $100 thousand in loans.

Many critics of Duncan’s plan have pointed out that this situation reveals how flawed the U.S. system of student loans is, where the government is responsible for essentially acting as banker. Student debt in the U.S. has doubled over the past decade, and continues to rise. Hopefully this debt forgiveness will do more than help students. Maybe it will help us rethink how we fund higher education.

[via NYT]

Contact the author at annalee@gizmodo.com.
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FIGJAM
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FIGJAMAnnalee Newitz
6/09/15 10:02pm
Fingers crossed that University of Phoenix is next.

4 20 Reply
PsychoNun (Is actually a dude)
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PsychoNun (Is actually a dude)Annalee Newitz
6/09/15 10:05pm
Evangelion 1.11 : You are (not) a loan

1 20 Reply
Cliff_L
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Cliff_LAnnalee Newitz
6/09/15 10:21pm
I went to The Art Institute which just ended up closing 15 campuses. Hopefully the same thing happens in my situation. A lot of people including myself have stories of being subjected to sketchy loaning practices.

6 12 Reply
Que00010
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Que00010Annalee Newitz
6/09/15 10:26pm
Fraud or not, why should the rest of us pay for their misfortune/questionable judgement. People get defrauded all the time, and I don’t recall the rest of us being asked to bail them out. This is a lame grab for votes as traditional parties are losing younger voters.

8 24 Reply
- modplan
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  modplanQue00010
  6/09/15 10:38pm
  
  If the loans were not underwritten by the government, I would agree with you 100%. However, those that we elected decided to underwrite these loans for a fraudulent institution, and therefore the government is somewhat responsible, and even though the students impacted were likely not the brightest lightbulb in the bunch, the government owns those loans. If the loans had been provided by a private bank and were being forgiven by the taxpayer, I’d be furious.
  
  3 21 Reply
apotheosis49
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apotheosis49Annalee Newitz
6/09/15 9:49pm
I wonder what this would entail? My college promised a new state of the art building they didn’t deliver on until I left the school. It was a big reason I went there.

1 5 Reply
- Annalee Newitz
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  Annalee Newitzapotheosis49
  6/09/15 10:03pm
  
  I think it’s only for students who qualify as victims of fraud. I’m not sure how promising a new building fits?
  
  1 3 Reply
GrauGeist
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GrauGeistAnnalee Newitz
6/09/15 9:44pm
That’s pretty fucked up if I don’t get a refund on the student loan I paid off.

2 7 Reply
- Annalee Newitz
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  Annalee NewitzGrauGeist
  6/09/15 10:03pm
  
  Did you go to one of the Corinthian Colleges?
  
  1 3 Reply
- modplan
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  modplanGrauGeist
  6/09/15 10:06pm
  
  Only fucked up if you went to a school owned by Corinthian, they’re the only ones (so far) accused of extensive fraud. Did you?
  
  2 7 Reply
- sigmaoctans
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  sigmaoctansmodplan
  6/09/15 10:30pm
  
  Many, many other schools have been widely accused of extensive fraud. Virtually all private, for-profit schools, like University of Phoenix, DeVry, Apollo, etc. are also giant frauds that milk student loans from ignorant people.
  
  Are we going to bail them out too?
  
  2 5 Reply
- Annalee Newitz
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  Annalee Newitzsigmaoctans
  6/09/15 11:23pm
  
  This isn’t bailing out the school. It’s forgiving debt that people were hoodwinked into taking. So if there is an investigation that reveals any of these other schools are committing acts of fraud that are specifically related to tricking people into getting loans, then yes, obviously those loans should be forgiven.
  
  3 3 Reply
- sigmaoctans
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  sigmaoctansAnnalee Newitz
  6/09/15 11:38pm
  
  I meant bailing out the students.
  
  “Hoodwinked”? They had YEARS to realize they were being “defrauded”. This isn’t even like getting a sub-prime mortgage, by signing a single contract, one time. These people had to sign up for new loans, over and over, year after year. When you take out federal loans, there’s paperwork to do every semester. They could have gotten out after the first semester. Most didn’t. If they weren’t aware of the massive debt they were piling up, that’s entirely their fault.
  
  Information has been all over the internet and news media for decades about the poor education that for-profit schools provide. I was aware of it when I was in high school, and avoided these kind of schools. Students who didn’t have the grades to attend a major university or college were entirely able to attend the much cheaper and higher-quality community colleges that exist in virtually every city in America.
  
  Finally, most of these loans were available to students not just for tuition, but for living expenses too. When you get a federal loan, you can take out MORE than the tuition amount, to cover things like housing, food, transportation, books, computers, clothing, and even entertainment. Many students, myself included, have loans in which a large chunk of that went to those expenses. These students apparently get 100% of their loans forgiven - which I guess includes those living expenses too. Nowhere on the Dept. of Ed website can I find any information that describes this program limited to tuition only. If you know otherwise, please correct me. But if that’s true, then its incredibly unfair that these people essentially get to wipe away a couple years’ worth of expenses that the rest of us are dutifully paying back.
  
  5 10 Reply
HeroOfCanton
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HeroOfCantonAnnalee Newitz
6/09/15 9:40pm
As a current student at a public, state university, and someone who is $30k+ in debt so far, I’m not sure how I feel about this. Granted, I’ve not followed this story to know all the information, but it seems to me they made poor choices and are now being bailed out.

A non-vitriolic response to help my understanding would not go amiss.

2 10 Reply
- Annalee Newitz
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  Annalee NewitzHeroOfCanton
  6/09/15 10:07pm
  
  You should read up on the story. These students were the victims of deliberate fraud on the part of Corinthian Colleges. They were tricked into taking on shady loans, by colleges that lied about their job placement rates. Then the colleges went bankrupt. It’s a pretty clear-cut case of fraud, which is why the government is forgiving the debt.
  
  https://studentaid.ed.gov/sa/about/annou...
  
  2 19 Reply
- modplan
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  modplanHeroOfCanton
  6/09/15 10:10pm
  
  The schools owned by this company were apparently super fraudy, like Nigerian Prince emailing you to come to their school and you get 3 wishes from a genie when you graduate, fraudy. Stories of classes that never had “teachers” assigned, or where movies were watched constantly, actual assignments never assigned, basically highschool 2.0, but charging the maximum allowed tuition. Your typical state school, nah, you’ll (if you don’t pick a dead-end major) get what you paid for.
  
  Morale of the story though, if you go to a for-profit college, you are a sucker.
  
  3 10 Reply
- under_electriclite
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  under_electricliteHeroOfCanton
  6/09/15 10:12pm
  
  Unless your school was under investigation by the government for fraud and in bankruptcy, the rest of us have to pay our debt.
  
  It doesn’t make sense for these peop le to pay back an institution that defrauded them with false data and did not provide the services they promised. For instance one school that gave degrees in Psychiatry had students do internships at Scientology chapters. This was not in any of the pamphlets or informational media provided by the school.
  
  2 5 Reply
- Tigerphoenix
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  TigerphoenixHeroOfCanton
  6/09/15 11:04pm
  
  Many schools have “recruiters” who are really just used car salesmen. They get you excited about their program by offering vague promises and showing misleading statistics about the field you are attempting to enter. Many students find out after the fact that “working in a related field”/internships could include folding clothes at the GAP or something similar. Sometimes you’ll receive scholarships that are awarded to just about anyone who is considering not going to a school but the pretense is that you are being offered a scholarship based on merit. Very often people think they are getting a deal when in reality the costs of education are usually artificially bloated. There are probably a thousand different games for profit schools play in order to put butts in seats and very little repercussion for not following through with their promises. Been there. Done that. It’s actually quite common but most people don’t find out until they’ve committed to a program and are already deep in debt.
  
  7 Reply