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Marketplace

Corinthian students get a break on their student loans

Tracey Samuelson Jun 9, 2015
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The U.S. Department of Education has announced it will forgive the federal loans of thousands of students who attended Corinthian College, the for-profit system that closed or sold its campuses after the government found evidence of predatory recruiting and falsified placement rates.

It’s part of a larger effort to streamline the process through which students from any school can have their federal student loans forgiven if the school closes or there’s found to be fraud on the part of the colleges.

“This is the challenge the government is facing because we’ve never had a closing or bankruptcy this large before,” says Donald Heller, the dean of the college of education at Michigan State University. “The government is figuring out how to deal with having tens of thousands of students who are potential eligible for the  loan forgiveness. Ideally, you’d want to have the federal government be very active in reaching out to them and not just passively relying on them applying.”

Pauline Abernathy, vice president at The Institute for College Access & Success, thinks the government could go even further, automating loan forgiveness for eligible students.

Currently, students have to apply for relief, a process which she says can range from simple form to a more involved application describing how the school broke a law and how the student was harmed.

“If the government has already documented that they are the victims of fraud and are eligible for a discharge, why not just discharge the loan automatically?” she says. “[The application] creates more work for the government and for the borrower when the government already knows that they are eligible for a discharge.”

In the past, Abernathy says only tiny fraction of people eligible for these types of programs apply.

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