For-profit college chain Corinthian Colleges abruptly shut down at the end of April, amid federal and state investigations into its supposedly predatory practices.
Now, former students and student advocacy organisations are seeking wholesale loan forgiveness under the “defence to repayment” provision within the Higher Education Act.
That law lets borrowers cite a college’s “acts or omissions” as reasons why they shouldn’t have to pay their loans back.
The only issue: The Department of Education (ED) admittedly doesn’t know how to interpret the provision.
The provision was added just 15 years ago, and Secretary of Education Arne Duncan acknowledges that it hasn’t really come up much before now, the Chronicle of Higher Education reported.
“We don’t have a lot of practice in this,” Duncan said last month, according to the Chronicle of Higher Education. “The rules aren’t very clear.”
There are enormous implications for both student borrowers seeking relief, and the ED, depending on how the provision is interpreted.
Student advocacy groups are pushing the ED to issue a wholesale discharge of all loans for all students who attended Corinthian. The Corinthian 100 — a group of 100 college grads refusing to pay back their student loans and advocating on behalf of all Corinthian students — have met with the ED on numerous occasions.
They have argued that a class-wide discharge of the debt is the only way for the ED to take responsibility for “aiding and abetting” the allegedly predatory and scam-like practices of Corinthian. The group estimates that this would cost the ED $US1.5 billion.
But the ED is leaning towards an individualized approach, mindful of the precedent such a move would set. An individualized approach would mean that any former Corinthian students would need to provide details about their case on a one-by-one basis, and the ED would determine if they were eligible for a loan discharge.
Student advocacy groups believe that this sets the burden of proof on the students and would discourage students from seeking relief in the first place.
No decision has yet been reached but the department is beginning to prepare itself for the next steps in the process.
“While no final decisions have been made about how debt relief will work, we are clear that it will require some additional staff in our department,” a spokesperson for the ED said, according to the Chronicle.
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