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"It's Complicated": Public Counsel on Expansion of Debt Relief to More Former Students of Corinthian Colleges

LOS ANGELES-Public Counsel, which has been working as special counsel to the CCI Student Creditor Trust, a trust established to, among other things, assist former students of Corinthian Colleges seeking relief from harms suffered as a result of Corinthian's misconduct, welcomed last Friday's announcement by the U.S. Secretary of Education. The announcement expands the number of students who are eligible to apply for the defense of repayment process that could lead to debt discharge-but warns that there is still more work to do.

"While the announcement is a positive step, the nightmare is still not over for former Corinthian students," said Anne Richardson, attorney and director of Public Counsel's Consumer Law Project. "This relief is not automatic, and former students will need to fill out an application with the Department in order to get this relief. It's more important than ever that students who were defrauded learn how to access the relief they're eligible for."

"While I'm disappointed that the Department is unable to discharge the debts of the students affected by Corinthian Colleges' fraudulent activities, this announcement is another step toward advancing the interests of the defrauded students so that they will be able get relief from their loans," said Tasha Rincon, a former Corinthian student and a member of the Student Managers overseeing the activities of the CCI Student Trust, formed as a result of the Corinthian Colleges Plan of Liquidation in its bankruptcy case. "The Department knows who was enrolled, so it would be easy to do. Evidence collected by the Department shows that only a small percentage of students who are eligible for debt relief are actually applying-and that's a real problem. Second, the limited dates are arbitrary. Students like myself, who enrolled before the July 1, 2010 dates, were also defrauded. Where is justice for them?"

Last Friday's announcement follows a default judgment handed down last week in the California Attorney General's lawsuit against Corinthian.

"The Student Trust will be looking at ways that it can assist students to use the judgment to both apply for funds from the Student Tuition Recovery Fund (STRF) and to seek cancellation of their federal and private student loans," said Geoffrey L. Berman, Senior Managing Director of Development Specialists, Inc., the Trustee of the CCI Student Trust.

"This decision validates the position that we have always held regarding Corinthian's practices. Unfortunately, students will never actually receive the $1.2 billion because the estate has no money or assets," said Scott Gautier of Robins Kaplan LLP, attorneys for the CCI Student Trust. "Hopefully, this will be an important tool in helping students obtain relief for former Corinthian students that are still burdened with improper student loan debt based on Corinthian's deceptive recruiting practices."

Multiple investigations by federal and state law enforcement agencies, as well as the U.S. Department of Education, found that before they were shut down, Corinthian made widespread misrepresentations to prospective students in order to get them to enroll in expensive educational programs. These investigations showed that Corinthian's recruiters employed high-pressure sales tactics, falsified job placement and graduation rates, and made unrealistic promises about students' future salaries and career prospects.

As described in lawsuits by various state Attorneys General and the federal Consumer Financial Protection Bureau, Corinthian's private student loans were made as part of a complicated scheme to get around federal regulatory requirements designed to ensure that colleges would not exploit federal student loan programs. As part of this scheme, Corinthian artificially inflated tuition so that students would have to take out the maximum amount in federal student loans as well as more expensive loans from private lenders. Corinthian then agreed to pay third-party lenders to loan money to its students so that Corinthian would not have to make the loans itself. Corinthian failed to disclose its role in the private lending program and took improper and aggressive actions to collect on these loans while students were still in school, including by pulling students from classes and withholding their certificates.

Students who wish to find out whether their school is included in this streamlined process to discharge their debts, and to fill out an application, should go to the following link: http://www.studentaid.ed.gov/sa/about/announcements/corinthian. The government link, and other general information about efforts for greater student relief, can be found on the CCI Student Creditor Trust website at www.ccistudenttrust.com




Q: I attended one of these schools. Will the Department automatically discharge my debt? Can I stop paying back my loans?

A: No. The discharge is not automatic. You have to apply for the discharge, but through this process, the Department should discharge them once you do so. The website is: www.studentaid.ed.gov/sa/about/announcements/corinthian

Q: I have applied for a debt discharge. Can I stop paying back my loans at this point?

A: No. You should continue to pay your loans until notified by the Department that your debt has been discharged. However, you can ask for forbearance via the Department of Education's same website. Read the portion about loan forbearance carefully as interest continues to accrue even if you successfully put your loans into forbearance. In addition, you can also seek a new repayment plan, if you are financially not able to continue making your loans. Please check repayment plans under the same website.

Q: I did not attend a Corinthian school, but I do feel that my school engaged in misconduct and I want to dispute my federal student debt. Can I do that?

A: Yes. There isn't a streamlined process for it, as there is for certain Corinthian schools, and no guarantee as to what the Department of Education's decision will be, but you can still apply for a defense to repayment, using the same forms.

Q: I attended one of these schools, but not during this time frame. Can I still dispute my debt?

A: Yes. There isn't a streamlined process for it, and no guarantee as to what the Department of Education's decision will be, but you can still apply for a defense to repayment, using the same forms.