September 29, 2016

In Light of Troubling New Data, Sen. Warren Demands Education Department Halt Collection of Former Corinthian Students' Debt and Discharge Their Loans

Data Uncovered by Warren Staff Investigation Show Department Focused on Debt Collection, Not Providing Relief for Students Who Were Cheated by Corinthian

Text of the letter available here

Washington, DC - United States Senator Elizabeth Warren (D-Mass.) today wrote to U.S. Secretary of Education John King to halt collections on the loans of former Corinthian students and to discharge their debts. This request comes following new data uncovered relating to the Education Department's (ED) treatment of students who attended Corinthian Colleges, the large, for-profit educational outfit that filed for bankruptcy in 2015 amid findings from state and federal authorities that it had defrauded students.

"These troubling new data suggest that instead of focusing on getting these students the relief they are entitled to under federal law, the Department's student loan bank - working with its loan servicers and debt collectors - is instead intentionally collecting on debt that it knows may be eligible for discharge," wrote Senator Warren. "It is unconscionable that instead of helping these borrowers, vast numbers of Corinthian victims are currently being hounded by the Department's debt collectors - many having their credit slammed, their tax refunds seized, their Social Security and Earned Income Tax Credit (EITC) payments reduced, or their wages garnished - all to pay fraudulent debts that, under federal law and the Department's own policies, are likely eligible for discharge and thus, invalid."  

The data provided by ED during a Warren staff investigation showed that only a small fraction of former Corinthian students - around 4,000 - have actually received relief under the borrower defense discharge program. Meanwhile, nearly 80,000 former Corinthian students who were enrolled during the time that the Department found widespread fraud are currently in some form of debt collection as the direct result of actions by the Department's student loan bank. This includes over 30,000 borrowers whose tax refunds, EITC payments, and other government benefits like Social Security have been seized in order to pay off their debts, and more than 4,000 borrowers whose wages are being garnished. Less than a third of the Corinthian borrowers who have been put into collections have applied to the program, suggesting a failure in the effort to inform students of their rights to a discharge.

"Instead of adding insult to injury for tens of thousands of Corinthian victims by pushing scores of them into debt collection, the Department of Education should stand up for these students as it has promised to do for more than a year and immediately halt all collections on this debt," the senator wrote. "The Department should also use its expansive, existing authority to discharge these Corinthian borrowers' debts and take additional steps to ensure that no other students are facing collections or shouldering debt that is eligible for discharge due to fraud perpetrated by for-profit colleges."

The senator's letter requests that ED provide additional information about the steps it has taken to provide relief to students who attended each Corinthian campus and several additional predatory schools and who are entitled to student loan discharge as a result.

Read a PDF copy of Senator Warren's letter here.