WASHINGTON — Secretary of Education Arne Duncan said his department will forgive all outstanding loans to former Corinthian College students and other students if they were defrauded by their college.
Corinthian was a for profit school that folded and left some people with incomplete or worthless degrees.
When Corinthian closed, it had more than $143 million in debt and $20 million in assets.
A process will be put in place in the coming weeks to create a system to apply for loan forgiveness.
Taxpayers could be out an estimated $3.5 billion dollars if all eligible Corinthian College students take part in the program.
Senator Lamar Alexander, who heads up the Health, Education, Labor and Pensions Committee, said while he feels for the students, the department is establishing a dangerous precedent of making the government responsible for what a private business has done.
He said it’s another reason why the government should not act as banker for education loans.
Sen. Alexander likened it to buying a car that is a lemon and suing the the bank rather than the car maker.
Student loan debt is currently $1.2 trillion, more than double ten years ago.
“Corinthian-owned colleges engaged in fraudulent practices, including inflating job-placement rates, resulting in millions of dollars in federal fines,” said Congressman Steve Cohen. “While the company has since closed or sold its for-profit colleges, too many former Corinthian students still carry the burden of student loans for worthless degrees or programs they cannot complete. Secretary Duncan’s decision will help many of these students find relief they deserve, but questions remain about the scope of his announcement. I hope the debt relief process developed by the Department of Education for Corinthians’ former students is as inclusive and broad as possible. We should do everything we can to put students first.”