Fallout From Corinthian Collapse

The implosion of Corinthian Colleges came to an end Monday as the for-profit chain closed its doors for good -- but the political fallout for the Education Department remains. 

April 28, 2015
Senator Elizabeth Warren

WASHINGTON -- The implosion of Corinthian Colleges over the past 10 months was an unprecedented challenge for the U.S. Department of Education. But navigating the politics left in the wake of the company’s collapse may prove even trickier. 

As Corinthian shut down its remaining campuses on Monday, the Education Department was again defending its role in dismantling the for-profit college chain and facing renewed pressure from congressional Democrats to relieve the federal loans of students who attended Corinthian. 

The sudden closure of those campuses, which displaced approximately 16,000 students, could cost taxpayers as much as $214 million, according to a department official, who declined to be named. That figure represents the maximum possible hit to federal coffers if every student at the campuses shuttered Monday were to request a discharge of their federal loans based on Corinthian’s closure.

The actual amount of debt canceled is likely to be less, however, as students who continue their studies elsewhere would not be eligible for the closed-school discharge. 

The department official said that the potential cost to the federal government of Corinthian’s closure could have been higher if it weren’t for the department’s “rapid and strong action to ensure an orderly wind-down of Corinthian’s business.” 

Had Corinthian collapsed last fall before the department brokered the sale of most of the company’s U.S. campuses to the ECMC Group, the official said, taxpayers would have faced a liability of $639 million in possible loan discharges. 

Corinthian had more than 72,000 students last summer when the department-imposed restrictions on its access to federal aid caused a liquidity crisis at the company. Approximately 16,000 students had been enrolled this week, according to Corinthian. 

“This is a consequence of the orderly wind-down,” the department official said Monday. 

Intensifying Calls for Debt Relief

Some Democrats on Capitol Hill on Monday, meanwhile, sought to step up pressure on the Education Department to forgive the federal loans of students who attended Corinthian Colleges and some other for-profit institutions. 

Six Democrats sent a letter to the Education Department and the four companies it hires to collect loans, calling on the government and the servicers to immediately identify and notify students who may qualify for federal loan discharges or cancellations. 

The lawmakers, along with student activists and some state attorneys general, have been pushing the Education Department to set up a clear process for loan borrowers to file claims to have their loans canceled because of their college’s misconduct

Senator Elizabeth Warren of Massachusetts, who has been leading that charge, slammed the Education Department Monday for not setting up a process for handling those claims, known as “defense to repayment” claims.  

“These borrowers -- people who were cheated and people who have been buried in debt -- just keep on paying and the government keeps on collecting,” she said at forum on student loan debt at Howard University. “This is wrong.”

The department “has all the information it needs to simply discharge the loans” of Corinthian students, Warren said. “But the department isn’t doing that.” 

"We're pushing them hard," she told reporters after the event. She said that she had "more than once" discussed the issue directly with Education Secretary Arne Duncan.

Duncan said last week that the department was still deciding how to handle the defense to repayment claims, adding that “everything’s on the table.”

The department plans to provide new information on such claims during the first week of May, a department official said in an email on Monday.


Back to Top