Debt-Ridden Students Strike Back at Struggling Corinthian Colleges
Posted By Liz Seasholtz on March 19, 2015 at 3:41 pm
On February 23, the Corinthian Fifteen, a group of students who obtained loans to attend Corinthian Colleges, began a debtor’s strike, refusing to make payments on their federal and private loans. The students have joined forces with the Debt Collective, an arm of the Occupy Movement that focuses on challenging creditors, buying back debt, and forgiving it through a rolling jubilee. The strike is just the latest in a string of financial and legal struggles for the for-profit educator, which has faced federal investigations, declining enrollment and bankruptcy in recent months.
Student advocates in high places
The Corinthian Fifteen are building their case on rights cited by Senator Elizabeth Warren, D-MA, in her December 2014 letter to the Department of Education. In that letter, Warren and 12 other senators asked that the department be more proactive in helping students stuck with loans from suspect institutions that have violated students’ rights. The legislators advocated for the department to exercise its authority to forgive federal student loans. They also referred to fine print in loan agreements that stipulates: “In some cases, [students] may assert, as a defense against collection of [their] loan[s], that the school did something wrong or failed to do something that it should have done.”
It’s fine print that clearly applies here. In 2014, former Massachusetts Attorney General Martha Coakley sued Corinthian Colleges for misrepresentation of training programs and job-placement rates. Finding that their degrees were invalid or undesirable to employers, students of the institution were left unemployed or underemployed and unable to repay substantial loans. They also often found that credits earned at Corinthians were not applicable or recognized at other colleges.
A troubled history
Corinthian, based in Santa Ana, California, was once the largest for-profit education provider in the U.S. The company had branches throughout the country and Canada, operating under the names Everest, Heald, and WyoTech. In 2010, over 100,000 students took college courses through Corinthian. However, over 60% of Corinthian students have gone into default on private student loans obtained through the company. Federal financial aid to Corinthian students also totaled more than $1 billion annually.
Corinthian has been under the microscope for several years, suspected of deceiving students about job prospects, encouraging them to take out excessive and unrealistic loans, and asking them to begin repayment of private loans prior to graduating. Lawsuits accusing Corinthian of predatory practices have been plentiful, filed by the federal Consumer Financial Protection Bureau, the attorney general of Massachusetts, and the attorney general of California. The school was delisted from the NASDAQ for failure to file financial reports with the Securities and Exchange Commission. In the summer of 2014, federally funded student loans to Corinthian were temporarily halted by the Education Department.
All 14 Canadian Corinthian institutions have been shut down, and in early 2015, Corinthian reached an agreement with the Education Department to close some programs and sell off the majority remaining. ECMC Group of Oakdale, Minnesota, a nonprofit education company whose primary business is debt collection, purchased over 50 Corinthian properties for $24 million. Three additional sales are pending.
Zenith Education Group, the arm of ECMC now overseeing the colleges, agreed to install a new executive team, hire an independent consultant to monitor student recruiting and advertising practices, and refrain from offering private student loans for 7 years. The group has also vowed not to sue or harass students with outstanding Corinthian loans. Any negative material on students’ credit reports related to this case will be removed as well.
While the Education Department’s actions will help with federal student loans, the Consumer Financial Protection Bureau has taken control of seeking relief for private student loans. The CFPB filed a lawsuit against Corinthian in September 2014, alleging that Corinthian “inflated tuition costs, misrepresented students’ future job prospects and engaged in aggressive debt-collection practices.”
The Corinthian Fifteen are confident that they stand on solid ethical and legal grounds in their unprecedented group action against predatory student lending. What ramifications this movement may have on the more than $1 trillion in U.S. student debt, however, remain unknown. Nearly 14 percent of federal student loans go into default. In any case, the Education Department is surely holding its breath that precedents set in the Corinthian case will not encourage additional student collectives to seek loan forgiveness under similar scenarios.