05.08.15

Senators Urge Secretary of Education Arne Duncan to Provide Support to Students Affected by the Closure of Corinthian Colleges

Lawmakers Write, “Our First Priority Should Be Making Sure We Help These Students Any Way We Can.”

Washington, D.C. – U.S. Senators Barbara Boxer (D-CA), Patty Murray (D-WA), Ranking Member of the Senate Health, Education, Labor, and Pensions (HELP) Committee, and seven other Senate Democrats today sent a letter to Secretary of Education Arne Duncan urging him to use the agency’s authority to provide support to the thousands of students affected by the closure of Corinthian Colleges, Inc. Other Senators signing the letter include Senators Dianne Feinstein (D-CA), Jack Reed (D-RI), Jeff Merkley (D-OR), Richard Blumenthal (D-CT), Tammy Baldwin (D-WI), Mazie K. Hirono (D-HI) and Sherrod Brown (D-OH).

The Senators wrote, “We are writing to request that the U.S. Department of Education use its authority to provide additional support to the 16,000 students whose academic careers were abruptly disrupted by the closure of Corinthian Colleges and to the former students at these schools who were equally affected by the company’s harmful practices and eventual bankruptcy.”

The Higher Education Act allows current students, as well as former students who withdrew up to 120 days prior to the closure of a college, to apply for a closed school loan discharge. The Senators asked Secretary Duncan to expand the window of eligibility for a discharge beyond the current 120 day limit, given the exceptional circumstances of Corinthian’s collapse, and to make sure that all of the 16,000 affected students are made aware of their rights.

Former students ineligible for a closed school loan discharge may be able to assert a defense to repayment, due to Corinthian’s alleged fraudulent practices. However, the Department of Education has not issued clear guidance on which students are eligible to assert a defense or the process for asserting a defense.

Boxer, Murray, and the other Democrats urged Secretary Duncan to provide clear guidance to all students harmed by the closure of Corinthian and its alleged practices, and to ensure that they create a consumer friendly process that allows group claims.

The Senators also urged Secretary Duncan to remove institutions currently under investigation for deceptive or fraudulent practices from the list of options provided to students seeking transfers, writing, “We must work together to protect students from moving from one bankrupt institution to another on the edge of insolvency.”

Prior to declaring bankruptcy, Corinthian was subject to lawsuits by the California Attorney General and the Consumer Finance Protection Bureau (CFPB) for violating consumer protection and securities laws. The company was also being investigated by the Departments of Education and Justice, the Securities and Exchange Commission and more than a dozen state attorneys general for unlawful practices. On April 14, 2015, Corinthian Colleges was fined nearly $30 million by the Department of Education for misrepresenting job placement rates.

The full text of the letter follows:

May 8, 2015

The Honorable Arne Duncan
Secretary
U.S. Department of Education
400 Maryland Avenue, SW
Washington, D.C. 20202

Dear Secretary Duncan:

We are writing to request that the U.S. Department of Education use its authority to provide additional support to the 16,000 students whose academic careers were abruptly disrupted by the closure of Corinthian Colleges and to the former students at these schools who were equally affected by the company’s harmful practices and eventual bankruptcy.

It is critical that the Department continue to inform students of their right to a closed school loan discharge and provide a discharge application to all eligible students as required by the Higher Education Act. The Department should also ensure that students understand how a closed school loan discharge will affect future eligibility for federal student aid programs or their ability to transfer to other colleges or universities through non-biased academic and financial aid counseling resources.

The Department should also coordinate with other federal agencies and all of its loan servicers to ensure that students have consistent and comprehensive information as they weigh their options for discharge or transfer. This coordination is crucial for student veterans whose enrollment at Corinthian was tied to their housing allowance and other benefits administered by the U.S. Department of Veterans Affairs.

For the Corinthian students who are not currently eligible for a closed school loan discharge because they withdrew more than 120 days prior to their college officially closing, we ask that you use your regulatory authority to extend the window of eligibility for a closed school discharge given the exceptional circumstances of Corinthian’s collapse. This will provide much needed relief to thousands of students who are now saddled with student loan debt and limited job opportunities. We also ask that you caution students against transferring to other institutions that may put them at risk, especially those that are currently under investigation for deceptive or fraudulent practices. Any such institution should be removed from the list of transfer options you provide to students. We must work together to protect students from moving from one bankrupt institution to another on the edge of insolvency.

Finally, for other students who are not covered by the closed school loan discharge option, we ask that you indicate whether borrowers will be eligible for loan forgiveness under your defense to repayment or other authority. Any defense to repayment or other process that may be announced should contain a simple and streamlined application process for borrowers who have been harmed, and should allow group claims to the maximum extent allowable under law. While you work on the details of this potential process, you should also provide these borrowers interim relief through your authority to grant forbearances or suspend collection activities. Our first priority should be making sure we help these students any way we can.

Thank you for your prompt attention to this matter. We hope that you will take the steps necessary to assist those who have been harmed by Corinthian’s bankruptcy.

Sincerely,

Barbara Boxer
United States Senator

Patty Murray
United States Senator

Dianne Feinstein
United States Senator

Jack Reed
United States Senator

Jeff Merkley
United States Senator

Richard Blumenthal
United States Senator

Tammy Baldwin
United States Senator

Mazie K. Hirono
United States Senator

Sherrod Brown
United States Senator

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