The U.S. Department of Education announced Wednesday it will forgive $5.8 billion in federal loan debt carried by former students of the Santa Ana-based Corinthian Colleges system, which collapsed in 2015 amid a fraud crackdown led by then-California Attorney General Kamala Harris, now the vice president.
The move will relieve debt carried by roughly 560,000 borrowers, according to the department, which called it the single largest loan discharge in the agency’s history.
“As of today, every student deceived, defrauded and driven into debt by Corinthian Colleges can rest assured that the Biden-Harris administration has their back and will discharge their federal student loans,” U.S. Secretary of Education Miguel Cardona said in a statement. “For far too long, Corinthian engaged in the wholesale financial exploitation of students, misleading them into taking on more and more debt to pay for promises they would never keep. While our actions today will relieve Corinthian Colleges’ victims of their burdens, the Department of Education is actively ramping up oversight to better protect today’s students from tactics and make sure that for-profit institutions — and the corporations that own them — never again get away with such abuse.”
Harris originally sued Corinthian Colleges in 2013, alleging the company made wholesale misrepresentations to students about graduates’ job-placement rates and engaged in deceptive and false advertising and recruitment efforts.
The suit led to federal investigations into the system, which shuttered most of its campuses in 2014 and was completely closed by 2015. The U.S. Department of Education eventually determined the company made blatant misrepresentations to students who attended its Everest, Heald College or WyoTech campuses about their prospects for finding a job once they graduated. The company also misrepresented the ability of students to transfer credits earned at the college, investigators determined.
A federal judge in 2016 confirmed the findings, imposing a $1 billion judgment against the company.
According to the DOE, students holding loan debt from the colleges will not have to take any action to have their debt forgiven. The agency will soon begin notifying borrowers about the decision, and the actual loans will be finally wiped out within a few months.
Harris is expected to make a formal announcement of the loan-forgiveness during an event Thursday at the Department of Education.