The Consumer Financial Protection Bureau (CFPB) and the Education Department announced Tuesday that it has secured more than $480 million in debt relief for borrowers who took out Corinthian College private school loans.
In September, the CFPB sued Corinthian College for luring students into expensive “Genesis” loans to cover tuition by advertising bogus job prospects and career services, an agency news release said.
Nearly all student borrowers were required to make monthly loan payments on their Genesis loans while attending school and as a result, the CFPB said more than 60 percent of all borrowers defaulted on these high-cost loans.
Corinthian College Inc. schools, now owned by ECMC Group, include Everest College and Everest Institute, which have campuses across the country; WyoTech, which is in Wyoming, California, Florida and Pennsylvania; and Heald College, which has 12 campuses in Oregon, California and Hawaii. ECMC has agreed not to operate a private student loan program for seven years.
The CFPB said student borrowers will see an immediate 40 percent reduction in the amount they owe on outstanding private student loans. And because the loans damaged so many borrowers’ credit reports, credit reporting agencies will receive instructions to delete any existing negative credit reporting information.
“These consumers were lured into high-cost loans destined to default, and then targeted with aggressive debt collection tactics,” CFPB Director Richard Cordray said in a statement. “We will be vigilant to ensure that consumers receive this important relief and that others are protected in the for-profit college industry.”
The agency estimates there is approximately $1.2 trillion in outstanding student loan debt, with more than 7 million Americans in default on more than $100 billion in balances.