The Department of Education announced Wednesday that it will cancel $5.8 billion in student loan debt for 560,000 borrowers who attended the now-defunct network of for-profit schools known as Corinthian Colleges.
The cancellation amounts to the largest one-time discharge ever made by the Department of Education.
Some of Corinthian’s former students were already eligible for debt cancellation, but the new action will ensure that all borrowers who attended from Corinthian’s founding in 1995 through its closure in April 2015 will get debt relief.
At its peak in 2010, Corinthian Colleges enrolled more than 110,000 students at 105 campuses, including some called Everest, Heald College or WyoTech. The Department of Education has found that Corinthian Colleges misled prospective students about the ability to transfer credits and falsified its job placement rate.
In 2013, Vice President Kamala Harris – who was California’s attorney general at the time – sued Corinthian Colleges, alleging the school was engaging in deceptive and false advertising and recruitment. The lawsuit triggered other federal and state investigations that ultimately resulted in Corinthian selling most of its campuses in 2014 and closing the remaining ones in 2015.
Political pressure to cancel student debt
Wednesday’s announcement is the latest – and biggest – action taken by the Biden administration to cancel federal student loan debt for borrowers who were defrauded by their for-profit colleges. The administration has also made it easier for permanently disabled borrowers as well as public sector workers to receive debt relief.
The new announcement brings the total student loan debt cancellation approved under the Biden administration to $25 billion since January 2021. President Joe Biden has also extended the pandemic-related payment pause several times – most recently moving the expiration date from May 1 to August 31.
But the administration’s piecemeal approach to canceling student loan debt fails to satisfy many other Democrats who have been calling on Biden to broadly cancel up to $50,000 of student loan debt for each of the 43 million borrowers.
So far, Biden has resisted that pressure, but has said he is open to canceling some federal student loan debt. On the campaign trail, he proposed canceling a minimum of $10,000 in student debt per person as a response to the pandemic, as well as forgiving all undergraduate tuition-related federal student debt from two- and four-year public colleges and universities for those borrowers earning up to $125,000 a year.
It’s not totally clear that the President’s executive authority allows him to broadly wipe away student debt. Last year, Biden directed lawyers at the Departments of Education and Justice to evaluate whether he does, in fact, have the power to broadly cancel federal student loan debt. The administration has not disclosed those findings.
But a September 2020 memo from lawyers at Harvard University’s Legal Services Center and its Project on Predatory Student Lending argues that Congress has given the power to broadly cancel federal student debt to the Department of Education through a law known as the Higher Education Act. It gives the education secretary the authority “to create and to cancel or modify debt owed under federal student loan programs,” the memo says.
Defrauded borrowers get relief
The fight to cancel Corinthian student debt began in 2014, when a group of students joined with a group called the Debt Collective. They organized the nation’s first student debt strike, refusing to make their student loan payments.
Former Corinthian students will now see their remaining federal student loan debt canceled automatically.
Students who believe they were defrauded by their college are generally required to file what’s known as a borrower defense to repayment claim with the Department of Education.
The Biden administration has been chipping away at a backlog of these claims that built up during the Trump administration. It has now canceled $7.9 billion for 690,000 borrowers whose institutions took advantage of them.
In some cases – like the action announced Wednesday – the government has decided that a whole group of students who attended a certain school at particular times are due relief. Advocacy groups say they hope the latest Corinthian action paves the way for future discharges for groups of borrowers.
“This announcement also sets the stage for future group-wide discharges for other for-profit schools including ITT Tech and Art Institute, and for broad based cancellation of all student debt,” said Thomas Gokey, co-founder of the Debt Collective, in a statement.
This story has been updated with additional information.
CNN’s Nikki Carvajal contributed to this report.