Government will erase debt for Corinthian Colleges students

corinthian
Former students of Corinthian Colleges could have their entire debt bills erased.

The Department of Education will relieve much of the remaining student debt for those who attended the now shuttered Corinthian Colleges. If all eligible students take advantage, the price tag could cost the government up to $3.5 billion.

Corinthian, the for-profit education company whose network once included 100 campuses across the country and 74,000 enrolled students, has been under scrutiny from federal regulators for years for alleged predatory lending practices. Regulators claim the school preyed on low-income students, encouraged them to take out expensive loans and then used abusive tactics to collect repayment before the students graduated.

After the Department of Education fined Corinthian $30 million for for overstating job placement rates for graduates, the company shut down its remaining campuses and filed for Chapter 11 protection last month.

Related: Veterans stranded after using GI Bill at defunct for-profit college

On Monday, the Department of Education said it would streamline the process of forgiving loans for Corinthian students whose schools have closed down or who believe they were victims of fraud, whether their school closed or not.

"I am fully committed to making sure students receive every penny of relief they are entitled to under law," said U.S. Secretary of Education Arne Duncan in a statement. "We will make this process as easy as possible for them, including by considering claims in groups wherever possible, and hold institutions accountable."

A college degree costs as much as 4 new cars
A college degree costs as much as 4 new cars

Since 2010, close to 350,000 students took out loans in order to attend a Corinthian College, totaling about $3.5 billion in federal loans.

Students from closed schools can request a school loan discharge. Roughly 15,000 to 16,000 borrowers fall into that category, according to the Department of Education.

The new rules announced Monday also extend to those who think they were victims of fraud. In these cases, students must "assert that a college's actions violated state law and affected their provision of educational services or their federal loan."

The Education Department also said it will appoint a Special Master to oversee borrower defense issues and make sure the process is simple and fair to students and taxpayers.

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