MURPHY, BLUMENTHAL, MEMBERS OF CONGRESS URGE EDUCATION DEPARTMENT TO GRANT FORMER CORINTHIAN COLLEGE STUDENTS IMMEDIATE RELIEF

Request comes after federal judge’s ruling that Corinthian Colleges broke the law

WASHINGTON – Today, following a recent federal district court ruling that the for-profit Corinthian College chain broke federal consumer protection laws, U.S. Senator Chris Murphy (D-Conn.) and U.S. Senator Richard Blumenthal (D-Conn.), along with U.S. Senators Elizabeth Warren (D-Mass.) and Patty Murray (D-Wash.), and U.S. Representatives Maxine Waters (D-Calif.) and Bobby Scott (D-Va.), led 11 other members of Congress in sending a bicameral letter urging the U.S. Department of Education (ED) to grant immediate, class-wide relief to former Corinthian Colleges students. 

On October 27, a federal judge for the U.S. District Court for the Northern District of Illinois issued a default judgment against Corinthian Colleges, finding that it violated the Consumer Financial Protection Act of 2010 (CFPA) ban on deceptive practices by misrepresenting job prospects and career services available to students to induce them into taking on debt. The company then engaged in predatory collections practices that directly interfered with the educational services for which students were paying.

“The law gives the Department broad authority to discharge loans when schools break the law, and we urge you to act to ensure that students receive the relief to which they are entitled under the law,” the members of Congress wrote. “[T]he Department should rely on the Northern District of Illinois’ judgment as sufficient proof of Corinthian’s unfair and deceptive practices, thus warranting a defense to repayment for Corinthian students. This federal court ruling gives the Department a clear basis for implementing full, immediate, class-wide discharge to Corinthian’s former students who were the victims of harmful and deceptive practices.”

In addition to Murphy, Blumenthal, Warren, Murray, Waters, and Scott, the letter was signed by U.S. Senators Barbara Boxer (D-Calif.), Dick Durbin (D-Ill.), Jack Reed (D-R.I.), Sheldon Whitehouse (D-R.I.), Sherrod Brown (D-Ohio.), Al Franken (D-Minn.), Tammy Baldwin (D-Wis.), and Edward J. Markey (D-Mass.), as well as U.S. Representatives Elijah E. Cummings (D-Md.), Keith Ellison (D-Minn.), and Janice Hahn (D-Calif.).

Last month, Murphy, a member of the U.S. Senate Health, Education, Labor, and Pensions Committee, and Blumenthal urged the Obama administration to take immediate action to stop for-profit colleges from fraudulently converting to non-profit status and evading federal income taxes, gainful employment regulations, and the 90/10/ rule. Murphy recently introduced and Blumenthal cosponsored the Students Before Profits Act to protect students and taxpayers from deceptive practices in the for-profit college sector.

The full text of the letter is below: 

Dear Secretary Duncan and Special Master Smith:

We write to urge the Department of Education (ED) to rely on the recent federal district court ruling that Corinthian Colleges, Inc. broke federal consumer protection laws as further justification for granting immediate, class-wide debt relief to former Corinthian students. The Department has said that it is "working to find ways to fast track relief based on legal findings for large groups of students" that would remove the need for students "to make any individual showing that they were affected by the school's fraud."[1] The Department should use this judgment to make good on that promise to students and move expeditiously in granting relief for Corinthian’s former students who were the victims of harmful and deceptive practices.

In September 2014, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit in the U.S. District Court for the Northern District of Illinois, alleging that Corinthian engaged in unlawful, unfair, abusive, and deceptive practices, luring tens of thousands of students into taking out predatory private loans by making material misrepresentations or omissions to students regarding the likelihood of receiving a job upon graduation.[2] On October 27, a federal judge agreed, granting a default judgment against Corinthian for violating federal consumer protections laws and ordering the company to pay $531 million to the CFPB.[3]

Among several findings of wrongdoing, the judgment specifically found that Corinthian violated the Consumer Financial Protection Act of 2010 (CFPA) ban on deceptive practices by misrepresenting job prospects and career services available to students to induce them into taking on debt. [4] The company then engaged in predatory collections practices that directly interfered with the educational services for which students were paying. The judge further ruled that Corinthian caused “substantial injury” to students by “…barring or pulling them from class, withholding educational resources, and otherwise preventing them from gaining access to educational courses or materials for which they had already paid…” to pressure students into repaying their homegrown loans with sky-high interest rates.[5]

Corinthian’s fraudulent actions ultimately led to its collapse and bankruptcy. As such, Corinthian and its executives are off the hook for financial liability in this and other judgments. We remind the Department that former students who were defrauded by Corinthian are not afforded this escape hatch, and remain liable for their debts unless the Department uses the tools that Congress has given it to grant immediate relief.

A federal judge has ruled that Corinthian lied to students by misrepresenting job prospects in order to get them to take on more and more federal and private debt, and in doing so, the school broke the law. The Department has already publicly documented this wrongdoing at Heald and three Everest campuses in Georgia, Minnesota, and West Virginia.[6] The law gives the Department broad authority to discharge loans when schools break the law, and we urge you to act to ensure that students receive the relief to which they are entitled under the law. Corinthian’s unlawful and deceptive acts also give rise to a cause of action under state laws, most of which have standards that are the same as, or similar to, the CFPA standards. Therefore, the Department should rely on the Northern District of Illinois’ judgment as sufficient proof of Corinthian’s unfair and deceptive practices, thus warranting a defense to repayment for Corinthian students.

This federal court ruling gives the Department a clear basis for implementing full, immediate, class-wide discharge to Corinthian’s former students who were the victims of harmful and deceptive practices, including all Direct and FFEL Loan borrowers who attended Corinthian since 2008 when the school began issuing its predatory loans. This judgment provides ample justification for the Department to expedite defense to repayment claims.

Rather than requiring Corinthian’s students to opt into relief, the Department should proactively grant relief to the borrowers it knows were cheated, without requiring borrowers to submit any onerous applications or other paperwork. There is no need for borrowers who were victims of harmful practices to have to jump through any additional hoops to verify information that the Department can already ascertain from enrollment records, state and federal investigations, and now, this federal judgment.

Thank you for your attention to this issue and we look forward to continuing to work with you.

Sincerely,