I took out federal student loans to attend Corinthian College. What can I do?
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Dear Credible Money Coach,
I need advice on consolidating my student loans which have accrued interest since 2010. I have two types of loans from Ministry of Education and Nelnet. My school, Heald College, was part of the now defunct for-profit Corinthian Colleges. What can I do? Thank you in advance for your help. —Jale
Hello Jale and thank you for your question. When I answer questions from readers, I rarely have the opportunity to deliver unequivocal good news. But there you go…you’re probably off the hook for these loans.
This is because on June 1, 2022, the United States Department of Education announced that it pay off $5.8 billion in federal student loan debt for borrowers who attended a Corinthian Colleges institution – including Heald College.
Since you say your loans are federal, through the Department of Education and its manager, Nelnet, you are likely one of the 560,000 lucky borrowers who will benefit from the waiver.
It is important to understand, however, that this discharge only applies to federal student loans. If you have private student loans that you may want to consolidate by refinancing them into one loan with a lower interest rate, it’s a good idea to compare your options using a marketplace like Credible.
What you need to know about landfill
As you mentioned in your question, Corinthian Colleges was a for-profit educational institution. It opened in 1995 and closed 20 years later. At one point, Corinthian operated over 100 campuses across the country.
The California Department of Education and Attorney General’s Office investigated Corinthian for several years. In its statement announcing the release early last month, the Education Department said Corinthian “engaged in widespread and pervasive misrepresentation regarding a borrower’s employment prospects, including guarantees that ‘he would find a job’.
The department also claims the institution misled students about their ability to transfer credit from another school and rigged the school’s placement rates.
This type of misrepresentation may be admissible federal student loan borrowers get their loans forgiven. And that is exactly what the Department of Education is doing for borrowers who have taken out federal loans to attend Corinthian Colleges.
How to get the discharge
Jale, here’s even better news: the Department of Education says you won’t have to do anything to get your federal student loans fully discharged.
“The department will soon begin notifying students who have attended Corinthian of this decision, with actual releases following in the coming months,” the department’s statement read. “Borrowers will not have to do anything to receive their discharges.”
That said, if you haven’t heard anything in a few months, you might consider contacting your loan manageryour state attorney general’s office or state department of education to see if they can help you.
What you can do about private student loans
Unfortunately, this discharge does not help borrowers who have taken out private student loans to attend a Corinthian school. The Department of Education does not have the authority to cancel private student loans.
However, since the federal and state governments have taken action against Corinthian colleges, a private lender may be willing to offer some relief to borrowers who used a private loan to pay to attend one of the older schools. If you have a private student loan, you will need to contact the lender to see what relief, if any, is available.
If your lender does not want to help you, refinance your private student loan one with a better interest rate and better terms can be a way to manage debt. You may be able to qualify for a better interest rate, especially if you have good credit.
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About the Author: Dan Roccato is a Clinical Professor of Finance at the University of San Diego Knauss School of Business, personal finance expert Credible Money Coach, published author and entrepreneur. He has held senior positions at Merrill Lynch and Morgan Stanley. He is a recognized expert in personal finance, global securities services and corporate stock options. You can find it on LinkedIn.