The Department of Education announced Monday that students affected by the for-profit Corinthian Colleges closures in April would have their student debts cleared, while any the money they have already paid, would be reimbursed. The new program could cost nearly $3.6 billion.
Loan forgiveness applies only to students that left school after June 20, 2014. On April 27, Corinthian closed its remaining 28 campuses of Heald, WyoTech, and Everest schools due to a series of wrongdoings the Department of Education found during an extensive investigation.
The department had already allowed students to get their federal loans paid in full but only within a 120-day window from the closure date of their school. This Monday’s announcement virtually expands that window to six months from closure date.
In 2014, Corinthian sold almost all its schools to a non-for-profit education group in the mist of a nationwide scandal triggered by a federal investigation. Federal officials found that the Corinthian falsified reports on job placement rates for marketing purposes.
Additionally, the Department of Education reported Monday that students who feel they are victims of a fraud caused by Corinthian’s misdeeds are also eligible for debt clearance, under the rule called “borrower defense to repayment.”
Nevertheless, students that had transferred or want to transfer their credits at another college for a similar program are no longer eligible for debt relief except for those that feel they were victims of a fraud or other crime under the state law. The latter can apply for loan forgiveness on the basis of “borrower defense to repayment” even if they had transferred their credits to another institution.
The Department of Education disclosed that such actions for student loan forgiveness have “rarely” been seen in the past.
Students were relieved of the news. Many of them said that their federal loans were the heaviest burden on their shoulders.
However, they now have a difficult choice to make. They must either transfer their credits to another school to be able to complete the programs they were in or apply for debt relief and forget about their diploma.
And without a diploma they may have a hard time in finding a decent job, they explained. On the other hand, for many students, applying for loan forgiveness is the right thing to do to prevent more debt from piling up at the new school.
According to the Department of Education, students can also either request forbearance for their loans or to have their collections halted for defaulted loans while their application is reviewed.
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