Students and former students of Corinthian Colleges, one of the largest for-profit higher-education chains in North America, will be getting $480 million worth of debt relief after the troubled schools were bought out by another company.
The federal Consumer Financial Protection Bureau and the U.S. Department of Education announced the refunds Tuesday, saying students were harmed by the chain’s high-price student loan program — so-called Genesis loans.
“Today’s action will provide substantial relief to current and past students who were harmed by Corinthian’s predatory lending scheme,” CFPB director Richard Cordray said in a news release. “These consumers were lured into high-cost loans destined to default, and then targeted with aggressive debt collection tactics. We will be vigilant to ensure that consumers receive this important relief and that others are protected in the for-profit college industry.”
The bureau sued Corinthian Colleges last year, accusing it of luring tens of thousands of students into taking out loans with false promises of job prospects and career services. The bureau alleged that the schools also used illegal collection tactics to pressure students to pay back the loans — even while they were still in school.
Interest rates on the Genesis loans were more than twice those of more competitive student loans and more than 60% of students defaulted on the loans before they completed their studies, according to the release.
That lawsuit is ongoing.
The Education Credit Management Corporation bought out many of the Corinthian schools and is running them under its nonprofit wing. Under a deal struck with the government, ECMC will not operate a private student loan program for at least seven years and has agreed to a set of new consumer protections.
“Today, we begin delivering on our promise to transform the Everest and WyoTech schools we have acquired into first-rate career colleges where success is measured not by how many students we enroll, but by how many students complete their programs and get fulfilling jobs when they graduate,” David Hawn, president and CEO of ECMC Group, said in a Tuesday news release.
Under ECMC’s deal with the government, students with loan debt will immediately receive a 40% reduction in how much they owe. Eligible students will be notified and will get the reduction automatically.
The group also agreed to stop aggressive tactics used by Corinthian to collect on student debt, including the threat of lawsuits, and work to clear the credit reports of students who have been harmed by predatory loans from Corinthian.
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