Corinthian Colleges Loans Are Being Forgiven!
That’s right! Thanks to the incredibly brave efforts of the Corinthian 15 (now rebranded “The Corinthian Collective since they’ve grown to 1,500+ members!), President Obama’s Administration has decided to forgive all student loan debt related to Corinthian colleges courses.
This forgiveness includes any loans that were used at the following Corinthian-affiliated schools:
The forgiveness program announced by President Obama on June 8th offers up to $3.6 BILLION in forgiveness benefits, but it does come with some restrictions.
This post outlines the details of the plan, and walks you through the application process for claiming your benefits.
Why Are Corinthian Loans Being Forgiven?
Corinthian Colleges, Inc. got hammered by federal enforcement actions over the past 6 months, including all sorts of penalties for misleading students about job placement rates and pressuring them into taking out massive student loans.
As a result of those enforcement actions, and the slowdown in new student signups, Corinthian was in a world of financial trouble and ended up having to sell off a bunch of its schools to Zenith Education Group.
At first, it seemed like the company could pull through and that Corinthian-affiliated schools would continue to operate, but they abruptly announced they were closing the rest of their schools (about 30 more campuses) on April 27th, 2015.
What Happened to the Students?
With many thousands of students still enrolled in these programs, and many of them saddled with enormous student loans, a financial crisis erupted. First came the protests, and the Corinthian 15 strikers group who publicly pledged to refuse to pay back their Corinthian debt.
Then came tons of media attention and further pressure to offer some form of real financial assistance. The good news here is that there is a happy ending to this story.
On June 8th, 2015, the Department of Education announced that they will support many of the students who got caught up in Corinthian’s collapse, and that many of those students will qualify for comprehensive student loan debt forgiveness benefits.
How Does Corinthian Colleges Debt Forgiveness Work?
The rules are pretty simple. To qualify for the Corinthian colleges loan forgiveness benefits, you must satisfy one of the two following eligibility conditions:
- Two Types of Corinthian Forgiveness Benefits
- Closed School Relief – You qualify for the Closed School Relief program if you attended one of the Corinthian schools that closed on April 27th, 2015
- Defrauded Student Relief – You qualify for the Defrauded Student Relief program if you were defrauded (lied to, scammed, etc.) by a Corinthian school that you went to, or you believe that the school violated state laws (whether or not it was shut down)
The first point above is cut-and-dry – if you went to one of the schools that were shut on April 27th, you’re going to qualify for forgiveness. Simple! I’ll explain the details below.
The second point above though is a bit of a difficult one. What the Government is saying is that if you think Corinthian lied to you by promising that you’d be able to get a great job, pay back your student loans quickly, or make a huge salary by investing time and money into their education program, then you should qualify for forgiveness too.
But it’s not necessarily going to be easy to prove that you were defrauded, or that the Corinthian campus violated state law. Scroll down to the section below called Defrauded Student Relief for advice on how to qualify for this benefit.
If the Corinthian school you attended was closed on April 27th, 2015, then you will qualify for debt forgiveness under the Closed School Relief program.
Two Options for Dealing with the Closure
- You can apply for a Closed School Student Loan Discharge
- You can transfer the credits you earned to another college or university and continue your higher education pursuit in a similar program
If you choose to take the sclosed school discharge route, then you’ll be eligible to receive up to 100% forgiveness for any federal Direct Loans, FFEL Program Loans or Federal Perkins Loans that you took to attend the school.
But it gets better, because not only will you get the rest of your debt wiped out, but you’ll also receive reimbursement for whatever amount of money you’ve already paid the Federal Government on these loans.
That is one hell of a deal!
There’s a couple caveats though – you won’t be able to qualify for the Corinthian colleges closed school discharge if:
- You finished your program at a Corinthian school
- You already transferred your Corinthian credits to another school in a similar program
- You were not attending the school when it closed, or you withdrew from Corinthian before June 20th, 2014
Corinthian Schools Closed on April 27th, 2015
|Everest College||Alhambra, CA|
|Everest College||Anaheim, CA|
|Everest College||Gardena, CA|
|Everest College||Ontario, CA (1460 S. Milliken Ave)|
|Everest College||San Bernardino, CA|
|Everest College||Santa Ana, CA|
|Everest College||Ontario, CA (1819 South Excise Ave)|
|Everest College||Rochester, NY|
|Everest College||Reseda, CA|
|Everest College||Phoenix, AZ|
|Everest College||Mesa, AZ|
|Everest College||Torrance, CA|
|Heald College||San Francisco, CA|
|Heald College - Honolulu||Honolulu, HI|
|Heald College||Portland, OR|
|Heald College - Kaneoche MCB||Kaneohe, HI|
|Heald College - Concord||Concord, CA|
|Heald College - Milpitas||Milpitas, CA|
|Heald College - Hayward||Hayward, CA|
|Heald College - Modesto||Salida, CA|
|Heald College - Roseville||Roseville, CA|
|Heald College - Salinas||Salinas, CA|
|Heald College - Stockton||Stockton, CA|
|Heald College - Rancho Cordova||Rancho Cordova, CA|
|Heald College - Fresno||Fresno, CA (255 West Bullard)|
|Heald College - Fresno Satellite||Fresno, CA (255 East River Park Circle)|
|WyoTech||Long Beach, CA|
|WyoTech||Los Angeles, CA|
|WyoTech||City of Industry, CA|
Again, it’s pretty simple. If you were a student at any of the schools listed above on or after June 20th, 2014, then you’re going to qualify for a debt discharge!
How to Apply for a Closed School Relief Discharge?
That’s the easy part. Do one of the following:
- Download and fill out the Closed School Loan Discharge Application form, then return it to whoever is servicing your loan (whoever you send monthly payments to)
- Contact whoever is servicing your loan and ask them what you need to do. Tell them that you know you qualify for the Closed School Relief discharge, and they will be legally obligated to walk you through the application process
If you aren’t sure who your loan servicer is, then to to the My Federal Student Aid website and login. This system will tell you. Or, call 1-800-4-FED-AID.
This is an awesome opportunity for anyone who went to a Corinthian school during this time period, but didn’t finish their program and who isn’t interested in continuing on at another school.
Defrauded Student Relief
This is a much more complicated process than the Closed School Relief benefit, since it will require some legal work on your behalf.
To qualify for the Defrauded Student Relief benefit, you’re going to have to use something called the “Borrower Defense to Repayment” provision, which is complicated, but here’s how it works:
The Defense Against Repayment provision allows you to discharge student loans if you can prove that the school committed fraud by either doing something or failing to do something that violated state law related to your loans or the educational services you took loans out to finance.
You can use this for any school – not just Corinthian colleges schools – whether or not the school has closed, and whether or not you completed their educational program.
The DOE’s Response
Because the Department of Education thinks there will be so many people trying to do this, they’ve made it easier than ever before to get loans discharged under the Defense Against Repayment Provision.
To apply for the benefit, you’ll need to send an email or a letter to the Department of Education including all of the following items (at a minimum – the more detail you provide, the better):
- Things to Include In Your Defense Against Repayment Letter
- State, in writing, that you “wish to assert a borrower defense to repayment based on state law
- Your first, middle and last name
- Your date of birth
- The last 4 digits of your Social Security number
- Your home address
- Your telephone number
- Your email address
- The name and location (address) of the school you attended
- The name of the program of study you were attending (basically your major)
- The degree, certificate, or other credential that you earned, or were seeking (Masters in XXX, Certificate of XXX, Bachelors in XXX, etc.)
- Your dates of enrollment at the school
- Documentation confirming your school, program of study and dates of enrollment (use transcripts or registration documents)
- Details about how the school defrauded you, including things like: the state and applicable law or cause of action, specific acts of alleged misconduct, how the alleged misconduct affected your decision to attend the school and take out loans to pay for the costs, the injury you’ve suffered as a result of the school’s misconduct, any other information that will help your cause
Everything above is pretty straightforward, except for the last item. What it means is that you need to write about how the school broke the law to convince you to sign up for their program.
If they promised anything about guaranteed income or employment, then you can probably use that. For example, if they said you’d earn more money after graduating, they’re screwed.
If they said you would be able to find a management position, they’re screwed. It’s things like that – promises of employment or income – that get the schools in hot water.
What Happens After My Letter Is Received?
After the Department of Education gets your letter, they’ll place your student loans in forbearance and collections activity will cease on any defaulted loans you might have while they investigate your claim.
Keep in mind though that interest will continue to accumulate on your loan while they investigate your claim, so if you end up not getting the discharge, this could be costly.
My advice to you is to HIRE A LAWYER and have them help you draft the Defense Against Repayment provision. Spending a few hundred or even a couple thousand dollars on lawyers fees may ensure that you save tens of thousands on student loans, so it’ll be worth it.
Will I Owe Taxes on Forgiven Debt?
At the time of this writing (September, 2015), the Corinthian Debt Forgiveness Program still requires that any student loan debt forgiven will end up leading to tax liabilities for the borrower.
That means, whatever amount of money you have forgiven via the program has to be listed on your state and Federal tax returns as ‘income’, and you’ll be taxed accordingly.
For some borrowers, the tax bill might be an even bigger burden than continuing to pay off the old loans, leading to a tricky situation.
You’ll need to determine just how much you’re going to end up owing in both Federal and State taxes before deciding if a Corinthian discharge is truly the best option for you.
One bright note – in California, State Senator Janet Nguyen’s resolution to “Eliminate Tax Liability on Forgiven Corinthian College Student Loan Debt” appears to have been unanimously passed.
Once fully enacted into law, this bill will protect California borrowers from having any State tax liabilities from forgiven Corinthian Colleges student loan debt.
These borrowers will still have to pay Federal taxes on any forgiven debt, but at least we’re seeing steps in the right direction on this issue.
Will I Have to Pay Accrued Interest on Forgiven Debt?
The only interest you’ll be forced to pay is whatever accrues during the time that your loan is placed on Forbearance (while your Defense to Repayment claim is being evaluated), and only if you stop making payments to cover interest accrual during that time.
If your claim is accepted and your Corinthian debt gets forgiven, then the interest which accrued on your loan will be forgiven, along with the principal balance.
Just make sure that you continue making payments on your debt (at least enough to cover the interest accrual) while your claim is being evaluated, and you shouldn’t end up in any trouble.
Did You Go To Heald?
I’ve got great news for Heald students!
The Department of Education basically hates Heald College, because they determined that Heald lied about job placement rates for many of its degree programs between 2010 and 2014.
If you were enrolled in any of the Heald College programs listed here, and you want to apply for the defense to repayment discharge, then you don’t have to write the huge defense against repayment letter outlined above, but can simply do this:
- Download or print out this Attestation Form
- Fill it out, sign it, then send it to the Department of Education with the attachments that it requires
- When you send it in, you can do it via email to FSAOperations@ed.gov, or by snail mail to Department of Education, PO Box 194407, San Francisco, CA 94119
Questions About Defense Against Repayment
If you’ve got questions about how the whole Defense Against Repayment thing works, then you can call the Government’s Borrower Defense Hotline at (855) 279-6207.
They’re available to walk you through the process Monday to Friday, 8:00 am to 8:00 pm EST.
Other Questions About Corinthian Debt Relief?
If you have other questions about the Corinthian debt relief program, then check out the Federal Government’s official FAQ page here.
Still Have Questions?
If you still can’t find answers to your questions, then feel free to ask me in the comments section below.
I’ll try to get you a response within a day or two.
Consolidate Your Loans!
If you’ve got debt from one of the Corinthian Colleges schools, then chances are that you’re facing significant private student loan debt.
For more information about how consolidation works, be sure to visit my page about it here.
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