Debt relief is coming for about 41,000 Corinthian Colleges student borrowers who took out private loans to attend the for-profit university — to the tune of $183 million. The relief comes from a deal struck by the Consumer Finance Protection Bureau and 13 states’ attorneys general.
That will come out to about 41,000 student borrowers — those who took out private student loans to attend the for-profit school — receiving debt relief as part of the terms of the settlement with Aequitas Capital Management, an investment firm that funded the loans.
“Tens of thousands of Corinthian students were harmed by the predatory lending scheme funded by Aequitas, turning dreams of higher education into a nightmare,” said CFPB Director Richard Cordray.
The regulatory case against Aequitas Capital Management and Corinthian Colleges is that they knowingly and intentionally wanted to lend high-interest loan products to students they knew were likely a default risk.
Corinthian officials reportedly described their potential student borrowers as “low self-esteem” people who felt “isolated” in a marketing presentation to Aequitas in 2013. The products also seem to have been particularly targeted at low-income consumers who could not have paid for a college education.
Corinthian was one of the largest for-profit colleges in the country with a student body of over 74,000 enrollees and over 100 campuses operated under a variety of names. But in the post-recession years — and under scrutiny of the Obama Administration — for-profit education centers like Corinthian found themselves under the federal microscope and facing fines for predatory lending and for overstating the job opportunities that graduation from their school really offered students. The government fined Corinthian $30 million in 2015, at which point the school went out of business.
The new settlement will make Corinthian students who were enrolled at the time the school closed down 2015 eligible for forgiveness of their remaining debt. Those who are currently in default will also be eligible for forgiveness.
All other former students with Genesis loans will be eligible for debt reduction by as much as 55 percent of their outstanding principal.
For the average borrower, that will come out to somewhere between $6,000 and $7,000 in loan relief, according to the office of New York Attorney General Eric Schneiderman.