Corinthian College students were lured into predatory loans and "destined to default," government agency says.
Former and current Corinthian College students will soon be relieved of more than $480 million in student loans.
According to the Consumer Financial Protection Bureau, it’s part of an agreement with student-loan servicing company ECMC Group, the new owner of the for-profit chain of colleges, which include Everest and WyoTech campuses.
The CFPB sued Corinthian Colleges, Inc. in 2014 for “luring tens of thousands of students to take out private loans, known as ‘Genesis loans,’ to cover expensive tuition costs by advertising bogus job prospects and career services,” a press release said.
The interest rates on Corinthian’s loans were nearly double that of federal student loans. More than 60 percent of students ended up defaulting on the loans within three years.
Corinthian borrowers should see a reduction of 40 percent on their outstanding high-interest loans. The CFPB said borrowers who are eligible for the loan forgiveness will be notified and automatically receive the debt reduction.
CFPB director Richard Cordray said in a statement:
These consumers were lured into high-cost loans destined to default, and then targeted with aggressive debt collection tactics. We will be vigilant to ensure that consumers receive this important relief and that others are protected in the for-profit college industry.
ECMC Group agreed to a number of consumer protections in its effort to take over the embattled Corinthian College chain, including:
- No private student loans. ECMC agreed to not offer private student loans for a minimum of seven years.
- Stop strong-arming students. The CFPB has ordered ECMC to stop Corinthian’s lawsuit threats and improper debt collection practices. “In addition, borrowers will not be harassed or have their debts disclosed to third parties,” the CFPB said.
- Credit report repair. Many student borrowers’ credit reports were damaged as a result of taking out Corinthian’s high-cost loans. “Credit reporting agencies will receive instructions to delete any existing negative credit reporting information from borrowers’ credit reports,” the CFPB said.
- Consumer protections. To ensure that Corinthian schools are not misrepresented to prospective students, ECMC will provide flexible withdrawal policies and transparency in its job prospects.
In exchange for the consumer protections ECMC has agreed to, it will be granted a release from the CFPB for any potential liability as a result of Corinthian’s alleged illegal activity.
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Student loans can pile up even when they aren’t considered predatory. For tips on how to get yours under control, watch this video: