DeVos’ Sliding Scale of Debt Relief for Defrauded Corinthian College Students

On December 20, 2017, US Department of Education (USDOE) issued this press release concerning how it plans to handle the borrower’s defense claims of roughly 20,000 students who filed said claims related to being defrauded by (and facing debt collection related to) now-defunct, for-profit fraudster, Corinthian Colleges.

In short, US ed sec Betsy DeVos has somehow decided that if the defrauded students have managed to garner a decent income, they must eat a greater share of the losses incurred from being defrauded by Corinthian. The USDOE media release adds (ostensibly in its own defense) that such sliding-scale debt forgiveness was “proposed by the Obama administration in its October 2016 regulation.”

From the USDOE press release (note that CCI is “Corinthian Colleges, Inc.):

Students whose current earnings are less than 50 percent of their peers from a passing gainful employment (GE) program will receive full relief. Students whose earnings are at 50 percent or more of their GE program peers will receive proportionally tiered relief to compensate for the difference and make them whole (Table 1).

 

Table 1

CCI Earnings as a Percentage of GE Earnings	Amount of Relief
1% to 49%	100%
50% to 59%	50%
60% to 69%	40%
70% to 79%	30%
80% to 89%	20%
90% and above	10%

So, beyond that 50-percent-GE mark (which indicates someone from CCI making 50 percent of the amount of money that another student with a similar credential from a supposedly-comparable, legit program is making), the greater the degree that students managed to recover from the Corinthian fraud by some other means, the greater the degree that those students are penalized by DeVos’ partial refunding scheme.

The December 27, 2017, New Republic expresses it this way:

Victims of the corrupt diploma mill will not have their student loans discharged; instead, they will get a portion of relief based on their current income. The more professional ingenuity they showed despite being defrauded by Corinthian, the less money they will get in restitution.

It’s yet another way in which DeVos has acted in favor of the for-profit college industry….

This is a highly uncommon approach to fraud resolution. Whether a student debtor succeeded after being defrauded bears no direct relationship to the fraud itself.

And claim denial? DeVos’ USDOE also tacks that blame on the Obama admin. An excerpt from the USDOE press release:

ACTION TAKEN TODAY

The Department has approved for discharge 12,900 pending claims submitted by former Corinthian Colleges, Inc. students, and 8,600 pending claims have been denied. This action includes claims that have been received during this administration. Many of the denied claims were identified for denial, but not acted on, by the prior administration.

The New Republic offers this bit of history on the situation:

Corinthian shut down in April 2015, after the Education Department fined it $30 million for misrepresenting job placement rates. State and federal regulators eventually won billions in fraud judgments against the bankrupt firm.

A coalition of students refused to pay their debts to Corinthian, citing a clause in their loan contracts allowing “defense to repayment” if they were defrauded. Even under Obama, the Education Department made loan relief unnecessarily burdensome, forcing students to prove the fraud instead of instituting blanket relief. Thousands of cases were left to DeVos to adjudicate, delaying forgiveness of billions of dollars.

And DeVos did almost nothing about them. In the final year of the Obama administration, 27,986 of 46,274 debt cancellation claims were dealt with; in the first several months under DeVos, only two claims were addressed—and both were denied. By early December, the backlog had grown to 95,000 unprocessed claims, mostly from Corinthian students. Interest accrued on the loans while students waited in limbo for a ruling. The Education Department even used debt collectors to garnish wages and seize tax refunds on some borrowers. Several state attorneys general sued the department to deal with the backlog.

Since DeVos is “changing the rules midstream,” the New Republic concludes that the USDOE’s sliding scale of debt forgiveness might be illegal and could be construed as DeVos’ (again and again) taking up for the for-profit colleges at the expense of students.

  Betsy DeVos

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Schneider is a southern Louisiana native, career teacher, trained researcher, and author of two other books: A Chronicle of Echoes: Who’s Who In the Implosion of American Public Education and Common Core Dilemma: Who Owns Our Schools?. You should buy these books. They’re great. No, really.

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