State attorneys general have long served on the front lines of the struggle to control and discipline predatory for-profit colleges that saddle students with crippling debt while granting them useless degrees, or no degrees at all. On April 9, nine of them who know firsthand how people can be deceived and bled dry sent a letter to the Department of Education, asking it to provide restitution — and help fix the problem — by forgiving the federal student loans of people harmed by crooked schools. The letter makes a strong case for prompt action.
The problem of for-profit schools received national exposure last year when Corinthian Colleges, one of the nation’s largest operators of for-profit colleges and trade schools, collapsed in the midst of a federal investigation. The company agreed to shut down or sell about 100 campuses. Earlier this week, the Department of Education fined Corinthian $30 million for misrepresenting job placement rates in one of the chains it owns, saying that the company had “violated students’ and taxpayers’ trust.”
Corinthian was already facing a lawsuit brought by the California attorney general, Kamala Harris, who accused the company of a host of wrongs, including lying to students and investors about job placement programs. The federal Consumer Financial Protection Bureau subsequently sued Corinthian on grounds that it had “lured tens of thousands of students to take out private loans to cover expensive tuition costs by advertising bogus job prospects and career services.”
The idea of forgiving these loans altogether gained traction when a group of former Corinthian students refused to repay their loans, which they claimed were often the product of a predatory private lending scheme. The group, part of an organization called the Debt Collective, noted that the Department of Education had broad authority to forgive debt in cases where schools had committed wrongdoing. The department could then force the offending schools to reimburse the government.
In December, 13 Senate Democrats urged the department to immediately forgive loans for Corinthian borrowers covered by lawsuits filed at the federal or state levels. In the April 9 letter to Education Secretary Arne Duncan, state attorneys general from California, Connecticut, Illinois, Kentucky, Massachusetts, New Mexico, New York, Oregon and Washington lent their voices to the forgiveness campaign, urging the department to “immediately relieve borrowers of the obligation to repay federal student loans that were incurred as a result of violations of state law by Corinthian Colleges, Inc.”
The letter said: “These cases against Corinthian have unmasked a school that relentlessly pursued potential students — including veterans, single parents, and first-time higher education seekers — promising jobs and high earnings, and preying on their hopes in an effort to secure federal funds.”
The attorneys general promised to help the federal government recoup loan balances from schools that violated state laws or benefited from unlawful deception.