US urged to forgive students’ loan debts

For-profit school duped many, AG and senators say

Attorney General Maura Healey has asked the US Department of Education to forgive the school loans of hundreds of Massachusetts students enrolled at Corinthian Colleges Inc., a for-profit educator investigated by state and federal authorities. AP/Associated Press

Attorney General Maura Healey has asked the US Department of Education to forgive the school loans of hundreds of Massachusetts students enrolled at Corinthian Colleges Inc., a for-profit educator investigated by state and federal authorities for practices that left many students deeply in debt, but without jobs.

Healey joins an effort led by Senator Elizabeth Warren, Democrat of Massachusetts, to persuade federal education officials to relieve students of debts incurred at for-profit schools that are accused of deceptive recruiting, enrollment, and lending practices.

Corinthian, which operated in Massachusetts as Everest Institute, was sued by Martha Coakley last year, when she was attorney general, over allegations that it had misrepresented training programs and job-placement rates, leaving many students without employment and unable to repay their loans.

“Schools should not obtain public monies based on actions in violation of state law, and students should not be required to pay for such violations,” Healey wrote in a recent letter to the Department of Education. “Based on our investigative findings, we believe the federal loans of Corinthian students in Massachusetts should be canceled.”

Corinthian declined to comment.

Brittney Patient of Lynn, a 2011 graduate of Corinthian’s Everest Institute in Chelsea, could use some relief. She earned a certificate to work in a medical office, but the jobs she found paid $12 an hour, about half of what the school had said she would earn and not enough to keep up with her loan payments.

She defaulted in 2012. Patient still owes about $15,000 and says her credit is ruined. A single mother of two, she cannot get a credit card and has lost apartments after rental agents checked her credit.

“I’m kind of stuck where I am,” said Patient, 24. “I have nothing really to fall back on.”

Corinthian, based in California, was once the nation’s largest for-profit school. It is among many for-profit educational chains offering degree and training programs that promise students rewarding careers and push them to take out loans but fail to deliver on the promises.

In December, Warren and 12 other senators, including Edward Markey, also of Massachusetts, wrote to the Department of Education, demanding that it take stronger steps to help students with loans from problem schools. The department has the authority to forgive student loans when a college violates a student’s rights. But it has not established a process for students to seek relief.

“Without such a process, duplicitous colleges are free to break the law, to suck down billions in federal student loan dollars, to treat students unfairly — and to stick borrowers with the bill,” the letter said. “This is exactly what we have seen at Corinthian Colleges. If the department fails to act, we will undoubtedly see it again.”

In her letter, Healey wrote that the need to cancel student loans in Corinthian’s case is “particularly acute,” because the company is on the brink of bankruptcy and unlikely to be able to provide refunds to students, as sought by the state’s lawsuit. “Given Corinthian’s financial position, the surest way to help students will be through cancellation of their federal loans,” Healey said.

The federal government has funneled more than $1 billion a year to Corinthian through financial aid to students. An Education Department spokeswoman said the agency is in touch with Warren and Healey and shares their commitment to “upholding the rights of students who may have been harmed by the actions of institutions that participate in federal student aid programs.”

Corinthian has all but collapsed under the weight of several state and federal investigations. Last summer, the Education Department temporarily withdrew federal funding of student loans to the school.

Corinthian entered into an agreement with the Education Department, shuttered some programs, including at two locations in Massachusetts, and recently sold more than 50 locations for $24 million to a nonprofit affiliate of ECMC Group, a Minneapolis company whose primary business is debt collection.

At its peak, Corinthian enrolled more that 70,000 students. More than 60 percent of Corinthian students defaulted on private student loans offered by the school, according to the Consumer Financial Protection Bureau. Tens of thousands also defaulted on federal student loans, said Pauline Abernathy, vice president of the Institute for College Access and Success, a Washington think tank.

Robyn Smith, an attorney for the National Consumer Law Center, a nonprofit advocacy group in Boston, said the Education Department released financial aid to Corinthian to keep it afloat while it closes or sells schools but has yet to establish a way for students to seek forgiveness of their loans.

“There’s widespread evidence they’ve engaged in years and years of deceiving students and taxpayers,” she said. “We’re not seeing any relief for the students who’ve suffered the consequences.”