WASHINGTON ―A top education official said Wednesday that the 16,000 former Corinthian Colleges students who saw their campuses abruptly close this week will automatically have their federal student loans discharged ― but only if they agree to forgo any credits they earned at the schools.
Ted Mitchell, Education Department undersecretary, said the department is bound by statute and regulation on how it handles such a case when a student’s school closes.
“You can have the credits you paid for or you can relinquish the credits if you want the money back. … Students can have one or the other, but not both,” Mitchell told The Associated Press.
Corinthian, a large chain of for-profit colleges that nearly collapsed last summer amid fraud allegations, shuttered its 28 remaining ground campuses this week, about two weeks after the Education Department announced it was fining it $30 million for misrepresentation.
The closures left students at campuses in California and a few other states struggling to decide whether to have the credits they’ve already earned transferred to another school or to try to get their federal loans forgiven. Already, some other for-profit schools have sought to recruit these students, and Sen. Dick Durbin, D-Ill., has criticized the department for making a list of areas schools available that included some for-profit schools that face investigations.
If all the thousands of students file a claim related to the closures, the cost to taxpayers would be about $215 million, Mitchell said.
Ultimately, though the potential cost to taxpayers related to the collapse of Corinthian could reach the billions. Many former students have filed “defense to repayment” claims with the department, using a previously little- known part of the law that allows students to have their loans forgiven if they were the victim of fraud.
