The Unprecedented Debt Relief The US Government Is Planning On Giving A Big Pool Of Students
Every once in a while, something unprecedented happens. Thankfully, for students of the Corinthian Colleges, a now-defunct, for-profit set of institutions, a never before seen “gift” of debt relief is being provided by the U.S. Government.
Founded in 1995, the Corinthian Colleges were established by executives at National Education Centers, Inc. (NECI), also a for-profit operator of vocational schools, based out of Irvine, California. Amongst Corinthian Colleges’ holdings were Everest College, Wyotech, and Heald. Many of its holdings were purchased from other for-profits institutions, and a variety of programs, from mechanical and technical school to nursing to business, were provided. Associate’s, bachelor’s, and master’s degree programs were offered at most of their schools, and many institutions offered online courses or programs.
The bankruptcy of Corinthian Colleges came quickly and somewhat unexpectedly. At its peak, all of the Corinthian Colleges combined employed more than 10,000 individuals, and enrolled more than 70,000 students at more than 100 locations. Earlier in 2015, prior to their bankruptcy, the Corinthian Colleges were fined $30 million by the United States Department of Education for misrepresenting employment numbers and statistics to the government and prospective students. In addition, Corinthian was told in early April 2015 that they wouldn’t be able to enroll students anymore at Heald.
What Exactly is Happening
Secretary of Education Arne Duncan said his department is planning to forgive the debt of any student defrauded by their college. Estimates of the costs of this scale of debt relief vary from $544 million to $3.5 billion. Whatever the cost, this is not only going to be an expensive act of debt relief for the government, but one that has never been seen of such a large scale.
The relief will be provided to any students who left a Corinthian school on or after June 20, 2015. It will be considered a closed-school discharge of their federal student loans. Filing for Chapter 11 bankruptcy on May 4th, 2015, Corinthian Colleges entered such a process with $143 million in debt and about $19 million in assets.
For-profit education companies such as Apollo Education Group Inc., Strayer Education Inc., and Corinthian have experienced lower enrollment rates in the past few years. The University of Phoenix, for example, has seen half of their student base erode since 2010. In 2014 alone, enrollment at for-profit colleges declined 9.7 percent.
2010 is around when the current problem for for-profit colleges started. That year, a government study unveiled high student debt, low graduation rates, and substandard employability of graduates. Subsequently, in 2011, rules were put in place that made it so for=profit colleges had to provide graduation rate and job placement figures to new students and applicants.
College enrollment, after a long boom, has seen a decrease over the past couple of years. For-profit schools have felt the impact of this decrease even more sharply than other schools. There is absolutely nothing wrong with attending a for-profit school, but you should do a thorough research of your options before committing to any program.