SAN FRANCISCO (CN) – California has secured $67 million in private loan debt relief for students defrauded by Corinthian Colleges, but many others still owe millions in federal loans under a Trump administration policy.
California Attorney General Xavier Becerra on Thursday announced a deal with private lender Balboa Student Loan Trust to forgive the outstanding debt of 35,000 California students who attended the now-defunct Corinthian Colleges.
“Thousands of defrauded Corinthian students will receive a letter in the mail informing them that their loans have been fully forgiven,” Becerra said. “We hope this delivers some measure of closure and peace of mind.”
Corinthian Colleges declared bankruptcy in April 2015 and shut down 100 college campuses after federal and state investigators found it misled students about post-graduation job prospects and the transferability of class credits.
Under the settlement announced Thursday, Balboa will forgive millions in loan debt and refund more than $500,000 in loan payments made since Aug. 1, 2017, along with $84,000 in payments made prior to that date. The company will also delete all negative credit reporting marks associated with the loans.
The deal builds on a prior settlement with private lender Aequitas Capital Management, which agreed to provide $51 million in debt relief to defrauded students in California last August.
During a press conference Thursday, Becerra went on to urge U.S. Department of Education Secretary Betsy Devos to “follow through on her end” and forgive the federal loan debt of more than 60,000 former Corinthian students in the U.S.
“Today, I call for Besty Devos to do her job, do the right thing for these defrauded Corinthian students,” Becerra said.
California sued Devos last December for refusing to provide full and immediate debt relief to defrauded students. That month, Devos rolled out a new “average earnings” rule that would force borrowers to pay back at least some loan debt based on their income.
Last month, a federal judge abolished the “average earnings” rule and ordered the Department of Education to stop collecting on those loans, but the same judge refused Monday to revive an Obama-era policy that promised full debt forgiveness to defrauded students.
Those rulings were issued in a class action filed by former Corinthian students, separate from California’s lawsuit.
On Monday, U.S. Magistrate Judge Sallie Kim indicated that she might dismiss California’s lawsuit for lack of standing because it has not shown the federal government’s student loan payment policies directly harm the state.
During Thursday’s press conference, California Deputy Attorney General Bernard Ardavan Eskandari insisted that the Department of Education’s “failure to fulfill its promises” reduces the number of students eligible for loans to attend state colleges and inflicts economic harm on tens of thousands of California citizens.
“We feel quite strongly California has a direct injury here, and we hope the judge agrees,” Eskandari said.
Last year, Devos announced a review that could lead to a full rollback of Obama administration rules that require for-profit colleges to disclose data showing rates of gainful employment among graduates to students and in their promotional materials.
“Since their creation under the previous administration, gainful employment regulations have been repeatedly challenged by educational institutions and overturned by the courts, underscoring the need for a regulatory reset,” Devos said when announcing the regulatory review last June.