Eighteen months after Corinthian Colleges Inc. completed its collapse – closing the remaining Heald College, Wyotech, and Everest University – tens of thousands of former students are still waiting to received some form of relief from the mountains of student loan debt they incurred to attend the defunct college. 

Nearly 80,000 former CCI students are facing some type of debt collection related to the loans they took out to attend the schools, despite the Department of Education’s ability to provide defense of repayment discharges — a process that would wipe away the debt based on the company’s alleged fraudulent actions.

This debt relief delay is unacceptable, Sen. Elizabeth Warren (MA) wrote in a letter [PDF] to Secretary of Education John King, urging him to immediately provide relief for students of the now-defunct schools.

The road to obtaining discharges has been mired with issues, most stemming from the fact that the process has seldom ever been used, and certainly never to the extend it is needed for CCI students.

According to the Dept. of Education, under the law, students may be eligible for loan forgiveness of any federal Direct Loans taken out to attend a school if that school committed fraud by doing something or failing to do something, or otherwise violated applicable state law related to the loans or the educational services paid for.

While numerous investigations from federal prosecutors, attorneys general, and agencies have found evidence of fraud by CCI — such as using inflated job placement rates and pushing students into high cost loans — and the Dept. previously announced that it would “fast track” relief by using findings from a joint investigation with state attorneys general to expedite the CCI claim process, only about 4,000 of the 23,000 students who filed claims have been unable to receive the discharges they are entitled to.

Instead, the majority of former students — even those who have applied for relief — continue to send monthly payments to the Dept. of Education, Warren writes.

“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 payments reduced, or wages garnished — all to pay fraudulent debts,” Warren wrote in the letter.

The report compiled by Warren’s staff, and based on data from the Dept. of Education, found that there are 79,717 people who are eligible to apply for loan forgiveness, but are instead dealing with debt collectors.

Of those borrowers, 30,000 have had tax refunds, tax credits, and other benefits seized, while 4,000 have had their wages garnished.

During a press conference on Thursday, reported by the Washington Post, King addressed Warren’s letter, noting that many of the borrowers she references aren’t eligible for discharges.

“Some are eligible if they seek to apply for closed-school discharge or borrower defense, others would not be. It’s worth pointing out that some of those students attended programs where there were findings of fraud, others did not,” King said.

In addition to King’s statement, the Post reports that Education under secretary Ted Mitchell released a statement saying that the Dept. has conducted “ongoing, extensive direct outreach” to former students who may be eligible for debt relief.

He also noted that the Dept. of Education will conduct a “targeted effort to reach Corinthian borrowers who have loans in collections or subject to Treasury tax offsets or wage garnishment” this fall.

Questions about the Department’s use of the defense of repayment rule and continued collection of debts from potentially eligible students comes a day after a former Everest University student used the Education Dept. and Department of Treasury for seizing his tax refund, the Post reports.

The man claims that the funds were seized despite action from the Massachusetts Attorney General’s office that included submitting a group defense claim that detailed CCI’s fraudulent actions against students, including the plaintiff.

Feds found widespread fraud at Corinthian Colleges. Why are students still paying the price? [The Washington Post]

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