Biden Administration Cancels $5.8 Billion in Corinthian Student Loan Debt

The U.S. Department of Education announced on June 1, 2022, that it would fully discharge (forgive) all remaining federal student loans borrowed to attend any campus owned or operated by Corinthian Colleges Inc. from its founding in 1995 through its closure in 2015.

Full loan discharges totaling $5.8 billion will be granted to 560,000 borrowers, including those who have not yet applied for a borrower defense discharge, a federal regulation that allows anyone who has been defrauded by their school to seek forgiveness for their student loans.

The right to seek a borrower defense discharge is based on a 2015 finding by the Department of Education that Corinthian engaged in widespread misrepresentations about borrowers' job prospects and ability to transfer credits.

Forgiveness is Automatic

Former students who have not yet applied for a discharge will not be required to take any action, according to the Department of Education. The Department said it would soon begin notifying students who attended Corinthian about the decision and automatically process the discharges in the months following notification.

According to Department officials, those with a remaining balance on their Corinthian debt will also get refunds on payments already made, but loans paid in full will not be refunded. This action is the largest single loan discharge the Department has made in history.

History of the Corinthian Investigation

In 2013, Vice President Kamala Harris, who was then attorney general of California, sued Corinthian alleging that the company intentionally misrepresented job placement rates and was engaging in deceptive and false advertising and recruitment.

Attorney General Harris' investigation and lawsuit triggered several additional inquiries by the Department and other federal and state regulators that eventually resulted in findings, in 2015, showing that Corinthian misrepresented job placement rates in programs across the country, program offerings, whether students could transfer credits, and several other misleading actions.

The 2015 findings formed the basis for the first borrower defense approvals against Corinthian. In 2016, Attorney General Harris and the state of California obtained more than $1 billion in judgments against Corinthian.

The June 1st announcement builds on the 2015 conclusions and judgments that Corinthian engaged in widespread and pervasive misrepresentations. Founded in 1995, Corinthian acquired several troubled private for-profit colleges across the country. At its peak in 2010, it enrolled more than 110,000 students at 105 campuses.

$25 Billion in Student Loan Relief Approved Since 2021

Including the most recent Corinthian group discharge, the U.S. Department of Education has now approved $25 billion in loan forgiveness for 1.3 million borrowers. This includes:

• $7.9 billion for 690,000 borrowers whose institutions took advantage of them through discharges related to borrower defense and school closures
• $6.8 billion for more than 113,000 borrowers through Public Service Loan Forgiveness (PSLF)
• More than $8.5 billion in total and permanent disability discharges for more than 400,000 borrowers

According to the Department, 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."