Student loans can feel intimidating to anyone who has them. But they become doubly worrisome when you consider what could happen if your school were to abruptly close.
Recently, Corinthian Colleges—one of the biggest for-profit colleges in the United States—sold some of its locations to Zenith Education (many of which will be closing shortly), filed for bankruptcy. Corinthian then closed its 28 remaining schools, leaving around 16,000 students wondering what will become of both their education and the student loan debt they’d accumulated to date.
The rapid shutdowns were a result of Corinthian’s more than $143 million in debt, combined with pressure from ongoing federal and state fraud investigations. This included allegations that the company had misled students into believing that their degrees would be more valuable than they actually were.
In fact, the Department of Education found that between 2010 and 2014, Heald College—a schools under Corinthian’s umbrella—had exaggerated job placement rates for several of its degree programs.
This sort of shutdown doesn’t happen often. Most schools give students months, if not years, of advance warning before closing their doors, according to U.S. News & World Report.
Nevertheless, the unique case of Corinthian Colleges shows that it’s possible for a school to abruptly close. This can be terrifying for current students, who will suddenly find themselves on the hook for tens of thousands of dollars in coursework that might not even be transferrable. But if you’re stuck with student loans from Corinthian Colleges, loan forgiveness may provide some relief.
If you’re a former Corinthian student, if your school closed before you could obtain your degree, or if you believe that your school is guilty of fraudulent practices, the good news is that you have several ways to get your money back.
Here’s a quick rundown on student debt forgiveness options if you’ve attended Corinthian Colleges or other for-profit universities.
If You’re a Former Corinthian Student…
The Department of Education has set up a streamlined process to help former Corinthian students to apply for debt relief.
If you attended one of the Corinthian schools that closed on April 27, 2015, and had not yet completed your degree, then you could be eligible for loan forgiveness by applying for a closed school loan discharge.
You could also be eligible for loan forgiveness via discharge if you withdrew from a Corinthian school on or after June 20, 2014, regardless of whether you completed your degree. You could even receive a loan discharge of up to 100% of your student loans, in addition to a reimbursement for any repayments you’ve made to date.
You also have the option of transferring your current credits to a similar program at another institution. Though this course of action will prevent you from being eligible for a closed school loan discharge, you might still be able to obtain debt relief due to the law of borrower defense to repayment. (See below.)
If you believe that you have been the victim of fraudulent practices by Corinthian schools, such as the misrepresentation of job placement rates by Heald College, then you could be eligible for the Department of Education’s program of loan forgiveness based on borrower defense.
For enroll in this program, you need to submit materials supporting your allegations of fraud. While your claim is being reviewed, your student loans will be placed in a state of forbearance. You won’t have to make any payments, though interest will continue to accrue. Also, any collections efforts on defaulted loans will cease.
For further information about these options and how to pursue them, the US Department of Education has set up a special debt relief information page for former Corinthian students.
Help If You Were A Student of Other Colleges
If you’re not a former Corinthian student but have experienced a similar situation, then there’s potential help for you, too.
If your school closed while you were still working toward your degree, then you may request a federal loan discharge. You will need to prove:
- You were enrolled in the school within 120 days of closing,
- You did not complete the coursework necessary to finish your program, and
- That you haven’t since transferred to a program at another institution.
You’re ineligible either if you’ve transferred your credits to a comparable institution to continue pursuing your degree or if you enrolled in a teach-out program, which allows students in a school due for closure to complete their studies before closure is official.
You can find information about applying for a closed school discharge at the Department of Education’s website.
If you completed your degree but your school was closed due to fraudulent practices, or you believe that the school was guilty of committing fraudulent practices, then you could be eligible for loan forgiveness based on borrower defense.
To apply for this allowance, you’ll need to complete an attestation form describing your claim. While your claim is being processed, your loans will be placed in forbearance, which means that won’t need to make regular payments though interest will continue to accrue.
Ultimately, if your borrower defense claim is upheld, then your federal loans will be forgiven. However, you could still need to pay interest that accrued during the forbearance period. If your claim is denied, then you will be required to repay your loans, plus the interest that accumulated while the claim was being processed.
You can learn more about your options by calling the Department of Education’s borrower defense hotline at 855-279-6207. It’s open Monday through Friday from 8 a.m. to 8 p.m. Eastern Time.
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