Senators Ask Dept. Of Education To Discharge Student Loans For Everest, WyoTech, Heald Students

everestWhile Corinthian Colleges — the failing for-profit educator behind schools like Everest University, WyoTech, and Heald College — sorts out new owners for most of its properties, several thousand of the schools’ students are left in limbo, unsure of who is responsible for their education — and unsure if that pricey education is worth the huge loans they’ve taken out to pay for it. Yesterday, a group of a dozen U.S. Senators asked the Dept. of Education to consider giving these students a way out of their federal student loans.

The letter [PDF] points out that the law provides “avenues for relief from overwhelming debt taken on by students at duplicitous colleges,” but that it requires the Dept. of Education to flex its regulatory muscle to make those loan discharges happen.

“For this reason, we are writing to request that the Department… to utilize that authority and immediately discharge federal student loans incurred by borrowers who have claims against Corinthian.”

This would include students covered under pending suits filed by attorneys general in states like Massachusetts, California and Wisconsin. In fact, it may cover all Corinthian students nationwide, as the company is currently being sued by the federal Consumer Financial Protection Bureau.

These lawsuits have alleged, among other claims, that Corinthian misled applicants about graduation rates and job-placement statistics in an effort to convince them to take out high-priced student loans that are guaranteed by the federal government and which generally can’t be discharged, even in cases of bankruptcy.

The Dept. of Education has previously stated that borrowers may request a discharge by asserting that the loan isn’t legally enforceable on the basis of a claim against the school, but the Senators point out that “The process for doing so… is far from clear.”

And so they have asked the Dept. of Education to clarify whether the current pending state lawsuits against Corinthian are sufficient to demonstrate that a loan isn’t legally enforceable.

If so, would students in states where the attorney general hasn’t filed suit be able to use those other states’ claims to make the case for loan discharge?

The letter also requests information from regulators on how the Department can clear up the process for requesting a discharge.

There is also the question of whether affected student loan borrowers would be reimbursed for any amount already paid on a loan.

A rep for Corinthian tells the Wall Street Journal that the Senators are getting ahead of themselves by assuming that the allegations in the pending lawsuits are true.

“The authors of this letter take the deeply unjust position that the federal government should act on the basis of unproven allegations which are being vigorously contested in court,” explains the CCI rep. “Their logic is dismayingly clear: Anyone who has been accused of anything is presumed guilty.”

It’s not surprising that the Dept. of Education has been dragging its feet on clarifying its stance on loan discharges for CCI students, as there are potentially billions of dollars in loan principal and interest that could be lost.