Organizers of a student debt strike canceled a planned meeting with the Department of Education on Monday, believing it would be used as a “publicity stunt” to announce new rules, placing what they consider a heavy burden on student debtors contesting fraudulently issued loans.
“They’re using us so they can pretend to care about students,” said Laura Hanna, an organizer with the Debt Collective, which has helped assemble a group of over 100 students from the Corinthian network of for-profit colleges who are refusing to pay back their loans.
The Corinthian 100 wants the Education Department to forgive all loans made to Corinthian students, through a clause in student loan contracts that allows borrowers to make a “defense to repayment” if they believe they were defrauded. The Education Department has broad authority to make such debt discharges automatic if the fraud was systemic.
Debt strikers have been bolstered by multiple state and federal investigations into Corinthian, for pressuring students into enrolling and taking out loans based on falsified job prospects, and illegally collecting debt. Corinthian, which operated Everest, Wyotech and Heald Colleges, based their business model on $1.4 billion annually from federal financial aid, the source of 85 percent of its revenue.
The legal pressure forced Corinthian to sell off most of their campuses to ECMC, primarily a debt collector, in a deal brokered by the government. The Education Department fined Corinthian $30 million just two weeks ago, denying several campuses in California participation in federal student loan programs. A week later, Corinthian shut down their thirty remaining campuses across the country.
The Education Department met with Debt Collective organizers a month ago to discuss blanket relief for all Corinthian students, promising to work on a solution and reconvene with Education Secretary Arne Duncan on Monday. But prior to that, organizers got word from sources in Congress and the legal community that the Education Department planned to announce at that meeting an individualized defense-to-repayment process. Under the proposal, students would have to prove their specific injury in order to qualify for having their loan discharged, and submit this to a third party hired by the Education Department.
The Corinthian 100 believes this forces students to hire lawyers and run an investigation that has already been proven by enforcement actions the Education Department and others have taken against Corinthian. “They have the proof, and there’s more every day,” said Tasha Courtright, one of the original Corinthian debt strikers from an Everest University campus in Ontario, California.
If the Education Department did forgive all Corinthian loans, they would take a financial hit estimated at $214 million. They could try to recoup losses from Corinthian, but the company just closed its doors. So debt strikers suspect the Department is purposely creating this arduous individual process to keep students from discharging their loans, minimizing the impact on their bottom line. “The plan is designed to prevent rather than facilitate justice for students,” the Debt Collective said in a statement.
Events at Courtright’s Ontario campus last week gave credence to the suggestion that the Education Department wants to block debt relief. Everest Ontario Metro was one of the thirty campuses, serving 16,000 students, which closed last Monday. Federal law states that students matriculating at colleges that shut down can apply to discharge their debt and start over, no questions asked.
But multiple sources reported that a representative of the Education Department berated students, and encouraged them to transfer credits to other for-profit colleges rather than obtain debt relief. “The guy said you would be wasting two or three years of your life if you relieved the debt,” said Frances Hutchinson, a recent graduate of the school, who spoke with the representative last week. “And if you decided not to pay, he said we’ll put a lien on your house, a lien on your car, garnish your wages and take your Social Security check if you still owe.” Laura Hanna with the Debt Collective described the pressure as “the same as the admissions process into these for-profit colleges.”
When asked about defense to repayment, the Education Department representative allegedly told students that he didn’t know what that was. “I said, I talked to your boss about it a few weeks ago,” said Tasha Courtright, one of the debt strikers. “He said, all we’re allowed to tell students is what’s on this piece of paper.” The representative would not give Courtright his name.
Even with a transfer, it’s unclear whether an education connected to Corinthian is worth anything. Recent Corinthian graduates report that their diplomas are effectively valueless. “My degree is as a paralegal. I was told by three attorneys, if you came to me looking for a job with that degree, you can forget it,” said Everest Ontario graduate Frances Hutchinson, who is $33,000 in debt from her education. Other graduates have talked of potential homelessness, because they cannot find work in their fields with a Corinthian degree.
Other for-profit colleges have prowled shut-down Corinthian campuses over the last week, attempting to lure students into transferring. The Education Department essentially blessed this by listing a number of for-profit colleges on their website as “viable transfer opportunities.” Some of those for-profit colleges are themselves under investigation for similar predatory tactics. Corinthian claims to be “trying to arrange partnerships” so students could complete their education, but credit transfers are unlikely to be recognized by universities other than for-profit career colleges.
“Our hope is that we can slow down this process,” said Laura Hanna of the Debt Collective. Over a dozen congressional Democrats and nine state attorneys general have appealed to the Education Department to discharge loans for Corinthian students. Thirty-three organizations led by Americans for Financial Reform sent a letter demanding blanket debt relief to the Education Department last Friday. The Corinthian 100 planned to meet with these allies in the coming weeks to discuss next steps. The Education Department has thus far refused to announce what they have planned for the defense-to-repayment process.
The Debt Collective believes the Education Department wanted to use them to bolster their public relations image. “It’s insulting to watch this so-called ‘regulatory body’ publicize that it cares about us while allowing the entities they are truly aligned with to bleed us dry,” said Paul Hicks, a Corinthian 100 member from Texas. Added debt striker Tasha Courtright, “I felt that I could trust my college because they were endorsed by the government, and now I feel like my government is responsible for what has happened to us.”