Former students of the troubled for-profit higher education company Corinthian Colleges are breathing a sigh of relief after the Department of Education's announcement on Monday. In the wake of the institution closing and filing for bankruptcy last month, the federal government will forgive Corinthian Colleges students' federal loans that could amount to some $3.5 billion.
Last month, after an almost year-long financial struggle amid fraud allegations, then selling many of its schools, the company filed for Chapter II bankruptcy. According to a statement released by the Education Department, students who attended Everest, Heald and Wyotech, and left any time after June 20 of last year will now be able to apply to get their student loan debt erased and be reimbursed for loan payments already made.
Up until Monday, only about 16,000 students were eligible for student loan forgiveness. Education Secretary Arne Duncan said the department plans to develop a system that would allow students — from Corinthian Colleges or otherwise — to be absolved of their loans if their colleges had defrauded them, "The New York Times" reported.
Corinthian was once one of the biggest for-profit college chains in the country, but five years ago, ran into trouble with the government after some of its recruiters were found encouraging students to lie in their financial aid applications. Last year, the Obama administration cut off federal aid to Corinthian amid investigations into its falsified job placement records and graduation rates.
Critics say the Education Department's move is not enough.
Last week, the "Corinthian Debt Strike," where many students pledged not to pay off their loans to urge the DOE to cancel their debts, grew twice in size. But even with Monday's announcement, some say that for students to acquire debt relief, they will have to go through a difficult and unnecessarily burdensome documentation process to prove that they were defrauded.
Some students also told that the federal government had nudged them towards transferring course credits — in which case they will be ineligible for the DOE's loan forgiveness — rather than discharging their loans.
Ballooning student loan debt.
Corinthian students are victims of a fraudulent for-profit business, but that they are drowning under the weight of their higher education expenses is nothing we haven't seen before.
National student loan debt currently stands at a staggering $1.2 trillion. 40 million people across the U.S. begin their post-college lives burdened by monumental student loan debt that has risen by 84 percent since the recession in 2008.
Some politicians have floated the idea of tuition-free college education — Democratic presidential candidate Bernie Sanders' bill and President Obama's free community college plan, for example — but those have a long way to go until it becomes a reality. Until then, the cost of higher education, whether at for-profit or not-for-profit institutions, continues to be a huge burden on educated Americans.
[Cover image via iStock]