Corinthian Colleges Predatory Lending
Under the Obama Administration, the Department of Education has been very hard on for-profit colleges. The tough new regulations have Corinthian Colleges in hot water. Corinthian Colleges is now saying its goodbyes and is going to attempt to sell 85 of its campuses and close a dozen more.
Corinthian Colleges, Inc. is one of the largest post-secondary education companies in the United States. It operates colleges under three different names, none of which are “Corinthian”. The schools are called Everest, Heald, and WyoTech. Over 70,000 students enrolled at different branches of the schools are going to be affected by the termination.
Corinthian’s immediate issues started in January when authorities from the Department of Education asked for top to bottom data about individual Corinthian students including their participation records, the occupations they wound up getting and their Social Security numbers.
Government authorities examined the data to determine whether the revenue driven school was complying with regulations connecting federal student loans to different measurable outcomes for students and graduates.
For reasons unclear, Corinthian failed to provide the records request to the satisfaction of Department of Education officials. The DOE responded by placing a hold on Corinthian’s federal aid funding for 21 days. This hold, combined with lower enrollment and pre-existing financial issues, caused a major cash flow problem for the company.
The for-profit education sector has been facing immense pressure in recent years. While part of the pressure is due to slumping enrollment, the companies have brought much of the heat on themselves because of business practices that range from questionable to downright predatory.
The Consumer Financial Protection Bureau announced it is suing Corinthian Colleges for illegal predatory lending. The Bureau is demanding that the school forgive more than $500 million in student loans. According to the CFPB’s complaint, Corinthian Colleges convinced students to enroll in the school by inflating its job placement rates. It even paid employers to hire graduates for at least one day in order to boost its numbers.
Meanwhile, Corinthian Colleges’ tuition and fees — which can climb to as high as $75,000 for a bachelor’s degree — are higher than what federal loans generally cover, forcing many students to take out private loans from the school. These loans, called “Genesis loans,” came with origination fees of 6% and interest rates of around 15% as of 2011 — much higher than the 3% and 7% charged on federal loan.
And it doesn’t stop there; after extending these loans to cash-strapped students, Corinthian Colleges allegedly used illegal and abusive tactics to collect on that money while students were still enrolled in school.
The CFPB found that Corinthian College employees have pulled students who were delinquent on their payments out of class, informed professors about the debts and blocked students from using computers or even receiving diplomas. Unlike other colleges, private student loans extended by Corinthian College come due once a student begins classes, the CFPB said.
The Department of Education had already been looking into Corinthian Colleges’ practices, and is currently working with the school to sell and close down its more than 100 campuses, where approximately 74,000 students are enrolled. If you were enrolled in one of these schools and feel you may be victim of these predatory lending practices, give us a call at (800) 940-8911.
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While details of this lawsuit are being worked out, Student Loan Services can help determine if you might qualify for the student loan forgiveness as a result of the lawsuit. And in the meantime, our team of dedicated student advocates will help reduce your monthly cost to the minimum amount possible until such a time that forgiveness may be a possibility.
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