(CN) – Nine state attorneys general have asked the U.S. Department of Education, which fined for-profit Corinthian Colleges nearly $30 million on Tuesday, to relieve Corinthian students of the obligation to repay their federal loans.
The Department of Education imposed the fine on Corinthian – which until recently ran Everest Institute, Wyotech and Heald College – after an investigation found 947 confirmed cases in which Heald misrepresented its job placement rates to current and prospective students.
The college paid temp agencies to hire its graduates to work as few as two days and counted those students has having found jobs, the Department of Education said.
Heald also counted job placements that were clearly out of the student’s field of study as in-field placements.
For example, an account major was deemed employed in her field though she worked at Taco Bell, and a business administration graduate was counted as placed in the field based on a seasonal clerk position at Macy’s that she got before receiving her degree.
“Instead of providing clear and accurate information to help students choose which college to attend, Corinthian violated students’ and taxpayers’ trust,” Under Secretary of Education Ted Mitchell said. “Their substantial misrepresentations evidence a blatant disregard not just for professional standards, but for students’ futures. This is unacceptable, and we are holding them accountable.”
As part of the fine, Heald College is no longer allowed to enroll students and must prepare to help its students either complete their education or continue it elsewhere.
Corinthian, in a statement, called the allegations “highly questionable” and “unsubstantiated.”
The allegations “should not be allowed to shift focus away from the central fact that Heald has a well-documented track record of providing quality education and significant value to its students for more than 150 years,” the college said.
The much-sued Corinthian, which at one point had 100 campuses across the country, has faced a number of blows in the past year.
In June 2014, the Education Department put a 21-day hold on Corinthian’s access to federal student loan and grant money.
In July, Corinthian announced that it would sell 85 of its campuses and wind down operations at 12 others under an agreement with the Department of Education. In return, the department agreed to provide $35 million in student aid funding, but an independent monitor was assigned to control the company’s finances.
A few months later, the Consumer Financial Protection Bureau filed a lawsuit against Corinthian for pushing students into private “Genesis loans.” The college claimed it did not have any interest in these loans, but in fact received bonuses for collecting past-due payments from students and took aggressive action to collect the debt, according to the complaint .
The college was also accused of keeping its tuition high – up to $75,000 – so that students were forced to take out private loans.
It looked liked Corinthian would have to shut down business altogether, but ECMC Group, a nonprofit, stepped in and purchased 56 of Corinthian’s campuses for $24 million in November last year.
In February, ECMC struck a deal with federal agencies and agreed to offer students around $480 million in debt relief at the campuses it took over to avoid liability for Corinthian’s actions.
It also agreed not to offer any private student loans for the next seven years and to stop any legal action against students over debt collection.
Now more than 100 former Corinthian students, so-called “debt strikers,” have asked the federal government to forgive their federal loans because they were defrauded by the school.
Attorneys general from nine states wrote a letter to the Education Department this week urging it to relieve borrowers of the obligation to repay federal student loans that were incurred as a result of the college’s violations of state laws.
“These students deserve relief. While various enforcers are pursuing Corinthian, these actions will not be enough to provide prompt help to Corinthian’s victims. The school’s liabilities likely exceed its assets, and it has made clear that it plans to file for bankruptcy and will likely try to limit the relief available to students as a result of the enforcement actions,” the AGs from Massachusetts, California, Connecticut, Illinois, Kentucky, New Mexico, New York, Oregon and Washington wrote.
“(T)he surest and most expedient way to help students is to have the Department relieve borrowers of the obligation to repay these federal loans. Ironically, protection through bankruptcy is not as readily available to Corinthian students because of the difficult burden imposed upon consumers who seek to discharge student loan debts,” the letter stated.
The DOE said it will provide more information to Corinthian’s students in coming days to help answer questions about their federal student aid and their options.
The department is also working on a process to help federal student loan borrowers submit a defense to repayment of their federal loans.
“We have kept students at the heart of every decision we have made about Corinthian, and we will continue to do so we as move forward,” Under Secretary Mitchell said. “When our borrowers bring claims to us that their school committed fraud or other violations of state law against them, we will give them the relief that they are entitled to under federal law and regulations.”
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