Categories: Student Loans

Survive Corinthian College: Debt Relief Measures to Fight Student Debt

One of the most scandalous stories in recent months was the bankruptcy of the for-profit Corinthian Colleges Inc. chain of schools, following the results of a federal investigation into possible illegal business practices. The years-long investigation concluded that Corinthian did, in fact, employ illegal practices to artificially inflate employment statistics for its graduates (such as hiring students and graduates for the minimal possible time to create the impression of successfully finding employment), predatory business practices, and misrepresenting the college in advertisement.

The Corinthian Colleges Collapse

The results of the investigation were published in 2014, causing the college to suddenly lose the ability to draw on federal student aid. The resulting crisis in finances compounded by a $500 million lawsuit has led to it gradually shuttering its operations, before finally shutting down all of its remaining operations in April. Corinthian was once one of the hottest names on the stock market, with its shares peaking at close to $33 per in 2004. However, accusations of involvement in student fraud, the potential loss of accreditation for some of its schools, and finally, the disastrous inquiry results caused its value to end up at $0.02 per share in 2015.

The Debt Fallout and Debt Relief

The collapse of a large education provider always causes shockwaves and in Corinthian’s case, this means a minimum of 16,000 students left with a sizable student debt in exchange for nothing. In response, on June 8th,, the Obama administration announced a special student loan forgiveness program, intended to provide debt relief to students victimized by Corinthian’s practices.

Generally speaking, former Corinthian students can apply for debt forgiveness in two cases:

  • if their school was one of the 30 locations closed on April 27th, 2015 (including those who withdrew without finishing their studies on or after June 20th, 2014),
  • if they believe they were victims of fraud or any other violation of the federal law on part of the Corinthian school, regardless of whether their school was closed or not.

The first option is available simply by submitting the Closed School Loan Discharge Application to the loan servicer or contacting the servicer directly to receive information on the precise steps required to benefit.

The secondary option is more complicated, as it bases on a borrower defense to repayment. The particulars of the process have not been finalized yet, but affected students may submit claims, pursuant to all the applicable requirements.

Effect and Limitations

If the claim is recognized, both options result in the loan being discharged and any amounts paid reimbursed to the student. Note that transferring credits to another school generally precludes the possibility of benefiting from this loan forgiveness program.

The exception is when the claim is made basing on defense to repayment. In this situation, even if the credit transfer has occurred and the claimant is continuing their education in another school, they may be eligible for loan forgiveness, depending on the particulars of their claim.


If you’re a Corinthian student seeking debt relief you have a friend in Van Horn Law Group. We are here to help.

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Chad Van Horn

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