The Biden administration announced Wednesday that they will cancel $5.8 billion in federal student loans for hundreds of thousands of students who attended schools affiliated with Corinthian Colleges.
The move is the largest student loan forgiveness measure by the Department of Education and will erase the debt for approximately 560,000 borrowers who enrolled in the for-profit Everest, Heald and WyoTech colleges. Corinthian owned or operated the institutions before it shuttered in 2015, as a result of an investigation by the department.
The department stated that borrowers will not be required to take any action in order to have their loans forgiven. Thousands of former Corinthian students were already eligible for debt cancellation, but were required to file paperwork and navigate a confusing application process.
Those with a remaining balance will also get refunds on payments they have already made. However, students who have paid off their loans will not be eligible.
In a release, the department said it is "also working on new regulations that will permanently improve a variety of the existing student loan relief programs, significantly reduce monthly payments, and provide greater protections for students and taxpayers against unaffordable debts."
Corinthian was one of the country's largest for-profit college companies, with more than 110,000 students at 105 campuses in 25 states. However, the company folded in 2015 after widespread findings of fraud caused the Department of Education to begin withholding loan funds.
It was revealed during an investigation that many of the schools were falsifying data on the success of their graduates. Additionally, some schools reported that students had found jobs in their fields of study even though they were working at fast-food chains or grocery stores. Students told investigators they were promised lucrative employment, but instead ended up with huge amounts of debt and few job prospects.
Federal officials also discovered that Corinthian falsely claimed that students’ credits could be transferred to other colleges.
After the federal crackdown, the Obama administration promised to forgive loans for Corinthian students whose programs lied about job placement rates. However, the amount of applications for debt forgiveness was so massive, and the process was so onerous, that a years-long backlog was created, leaving many former students still awaiting relief.
Education Secretary Miguel Cardona said in a statement Wednesday, "For far too long, Corinthian engaged in the wholesale financial exploitation of students, misleading them into taking on more and more debt to pay for promises they would never keep."
He added, "While our actions today will relieve Corinthian Colleges’ victims of their burdens, the Department of Education is actively ramping up oversight to better protect today’s students from tactics and make sure that for-profit institutions — and the corporations that own them — never again get away with such abuse."
The announcement comes as President Joe Biden is considering widespread student loan cancellation. While campaigning in 2020, Biden said he supported forgiving $10,000 in student loans for all borrowers. In April, Biden was considering student loan forgiveness but was not contemplating canceling $50,000 per borrower.
He previously indicated that cancellation of student debt should be done by Congress, but the White House now claims that Biden is considering whether to pursue cancellation through executive action.
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