What loan forgiveness means for an alumnus of Corinthian Colleges : NPR

The Department of Education will forgive all federal student loans from the now-defunct corporation. NPR’s Elissa Nadworny discusses it with former student Ann Bowers and journalist Josh Mitchell.



ELISSA NADWORNY, HOST:

The US Department of Education announced this week that it will forgive billions in federal student loans for those who attended college campuses belonging to the defunct for-profit Corinthian colleges. According to the department, the $5.8 billion loan cancellation is the largest discharge in its history. The decision will impact more than half a million students who have attended Corinthian-owned schools such as Everest Institute, WyoTech and Heald College. Corinthian closed in 2015 after the Department of Education discovered it had misled students about placement rates and the ability to transfer credits. Since then, former Corinthian students have been seeking closure by campaigning with the federal government to cancel their student loans.

We wanted to know more about how former students are living this moment, so we called one of these former students. Ann Bowers attended Everest College, and she joins us now. Anne, welcome.

ANN BOWERS: Thank you, Elissa.

NADWORNY: And to help us understand the Biden administration’s broader approach to loan forgiveness, we called Josh Mitchell. He reports on the economy for the Wall Street Journal. Welcome, Josh.

JOSH MITCHELL: Yes, thank you.

NADWORNY: So, Josh, I want to start with you. Can you give us a brief overview of how the Ministry of Education arrived at this decision?

MITCHELL: In the early 2010s, a group of states and the federal Department of Education began investigating this large, for-profit chain, Corinthian Colleges. It was a huge for-profit chain that offered online courses, as well as courses across the country at physical campuses, you know, for two-year programs in business, accounting, healthcare, and so on. And they started getting complaints from former students about placement rates. These colleges were telling students things like, if you come to this campus, we place 92% of our students in jobs once they leave.

So they gave students this impression that if you signed up and paid thousands of dollars in tuition, you were almost guaranteed to have a really good job when you left school. And it turned out that a lot of those students were coming out of those programs and not finding jobs. So, for example, on some of these campuses, they would say a 92% placement rate. But a state attorney general and the Department of Education have begun reviewing their books. They actually discovered that some of those placement rates were actually 12%.

And so many students have been misled by these surveys. And so for years, there were a lot of people across the country and a lot of poor people who enrolled on these campuses who just couldn’t repay their loans. And they argued that they had been deceived by the recruiters of these schools. And so the — now the Biden administration has now said we’re going to use the Higher Education Act to essentially cancel their loans. They have the right not to have to repay their debt because they contracted it under the wrong circumstances.

NADWORNY: So, Ann Bowers, I want to know how you’re experiencing all of this as it was happening. So Josh kind of gave us the context. Tell us your story.

BOWERS: With me, I didn’t know any of this was happening. I was too busy with my studies, of course, you know, I was just trying to do my best because I was disabled and trying to get out of my disability and be able to start my own business in marketing. Well, I got a call or text from a classmate and asked me if I heard what was going on at school, and I had no idea. And so he says, well, Google. I did it. And I said, oh, my God. The reaction I got was just horrible. And I’m like, OK, what do I do now? I am halfway through my baccalaureate.

And I started looking for other schools to go to, possibly transfer to, you know, and found out that Corinthian had taken all my money. They set me up for their private loans. This was their next step with me, as they have done with many, many students. We were trying to figure out, what will we do next? Where are we going? You know, what do we do about this? We have all this debt and we don’t have our diplomas. And the degrees we have are worthless because this school committed fraud. No one will want to hire their students. So our only choice was to decide to go on strike. We don’t pay. We can’t pay it.

NADWORNY: Well, Josh, I want to move on to this week’s announcement by the Department of Education. Can you explain what this action does, like, what sets it apart?

MITCHELL: So the Department of Education uses this law called defense against reimbursement. And the lawyers had discovered this long dormant law. And it’s pretty blurry. It basically says that if you can prove that you have been defrauded by your school, you have the right to have your loans canceled by the Department of Education. But the question was for years, how to prove that? What can be considered proof? And so the Obama administration and then the Trump administration tried to come up with rules that basically set out a process for borrowers to come to the department and say, I’ve been defrauded, here’s my evidence, please cancel my loans. And hundreds of thousands of people have done it. But there’s been this huge backlog because it’s just a huge bureaucratic process to go through.

And so basically this week the Biden administration said that instead of having individual borrowers hundreds of thousands of people come into the department and have, you know, employees review every application, they just said we We were just going to undo that in a mid-air shoot down. What’s interesting is that it’s not just Corinthian that has had these issues. There are plenty of other college alumni across the country at other for-profit colleges who have basically said the same thing. And they always ask for the cancellation of their loans. And so the Biden administration, as they’ve taken this big step, they’re also writing rules going forward to try to clarify when students can get their loans forgiven, and if future classes, you know , future groups, not just individuals, may also have their loans forgiven.

NADWORNY: Ann, I wonder if you could tell us a bit about – you got loan forgiveness in 2018, but not a lot of your peers. Did you talk about them – what it will mean for them now?

BOWERS: Oh, they’re related. We’re glad that happened. It gives hope to other students. And it changes a lot of lives because this debt that’s hanging over their heads prevents them from living their lives and, you know, supporting their families and–or buying a house.

NADWORNY: Josh, I want to ask you about the midterm election year. Right? Much of the talk among Democrats centers on widespread loan forgiveness at all universities and colleges. There are reports that the Biden administration is considering the plan to cancel $10,000 in loans for all borrowers. People in his own party say that is not enough. What does this week’s announcement on Corinthian colleges tell us about what the administration thinks about the future?

MITCHELL: The administration has always taken a more moderate approach within the Democratic Party when it comes to canceling student debt. And Elizabeth Warren, for example, during her presidential campaign demanding $50,000 at all levels. You had Bernie Sanders wanting to be even more aggressive in canceling student debt. So the Biden administration and President Biden have tried — looked for a more moderate approach, which is, let’s do $10,000 across the board if Congress does. They are now considering doing so through executive action. It is reported that they may not make 10,000 for everyone, but they will for people below a certain income threshold. But the larger administrative approach is basically trying to, you know, write off the debt of the most disadvantaged people, you know, groups that have really, you know, really been wronged by their schools, who have been cheated by their schools. And so that was the broader administrative approach. And I think this is an example.

NADWORNY: It was Josh Mitchell. He is an economics reporter for the Wall Street Journal. We also heard from Ann Bowers. She is a former student of Everest College. Thank you both very much for being with me.

MITCHELL: Of course. Thanks.

BOWERS: Thank you, Elissa.

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