The US Department of Education said on Monday it was moving to forgive much of the federal student debt of some of the 78,000 students who had attended the now-bankrupt for-profit chain Corinthian Colleges.
In a press conference, Secretary of Education Arne Duncan also said the department is going to create a plan that will forgive the debt of any student defrauded by their college, The New York Times’ Tamar Lewin notes.
Lewin noted that “the government has never before opened debt relief to such a potentially large pool of students.”
In a statement sent to Business Insider, the Education Department estimated that the cost of forgiving debt of students who attended one of Corinthian’s three colleges would be $US544 million.
The plan announced Monday will let students who left the schools run by Corinthian on or after June 20 last year receive a closed-school discharge of their federal student loans. This is instead of the usual period of 120 days up until it closed its last campuses on April 26, effectively adding about six months to the eligibility period.
Santa Ana, California-based Corinthian, which had operated the Heald College, Everest and WyoTech schools and offered degrees in healthcare and trades, filed for bankruptcy on May 4. It entered Chapter 11 with $US143 million in debt and about $US19 million in assets, according to Delaware bankruptcy court documents.
Late last year, Corinthian sold off more than half its campuses to non-profit education provider ECMC Group Inc. Thirteen campuses, included Everest and WyoTech in California, remained open up to the April 26 announcement.
In April, the Department of Education fined Corinthian $US30 million for misrepresenting job placement rates to students in its Heald College system, and said that Heald would no longer be allowed to enroll students.
Founded in 1995, Corinthian was one of the largest U.S. for-profit college operators, at one point employing more than 10,000 people, and running more than 100 campuses with 74,000 total students, court papers show.
For-profit education companies such as Corinthian, Apollo Education Group Inc and Strayer Education Inc, have struggled to attract students since a 2010 government crackdown revealed high student debt loads, low graduation rates and poor employability of graduates.
(Reporting by Eric Walsh; Additional reporting by Nick Brown in New York and Tom Heals in Wilmington, Delaware; Editing by Eric Beech)