Photo (cc) by DonkeyHotey
Just six months after Corinthian Colleges shuttered its operations and closed its campuses, a federal judge ruled that the now defunct for-profit college operator is liable for more than $530 million in loans taken out by students since 2011.
The default judgment against Corinthian Colleges was a big win for the Consumer Financial Protection Bureau, which filed suit against the college operator in September 2014 for allegedly engaging in a predatory lending scheme that duped tens of thousands of students into taking out private “Genesis” loans to cover expensive tuition fees by promoting phony job prospects and career services.
The loans also came with interest rates that sometimes topped 15 percent in 2011. During the same time period, federal student loans had an interest rate of 3 to 7 percent. The CFPB said that more than 60 percent of Corinthian students defaulted on the Genesis loans within three years.
Corinthian Colleges is also accused of using illegal harassing debt collection techniques to get students to pay on their loans. Students were also forced to start making loan payments while they were still attending school.
“Today’s ruling marks the end of our litigation against a company that severely harmed tens of thousands of students, turning dreams of higher education into a nightmare,” CFPB Director Richard Cordray said in a statement. “We all have much more work to do before current and past students who were hurt by Corinthian’s illegal practices can be made whole.”
After Corinthian Colleges closed its doors for good earlier this year, it filed for bankruptcy and was liquidated. Because the for-profit school, which operated as Heald College, Everest University and WyoTech, has been dissolved and its assets have been distributed, Corinthian is unable to pay the $530 million judgment, the CFPB said.
The CFPB will continue to pursue relief for consumers harmed by Corinthian’s unlawful conduct. The CFPB remains concerned about efforts to collect on loans made in association with Corinthian’s illegal conduct.
Although the court judgment may not result in consumer refunds, it could lay the foundation for the government to forgive hundreds of millions of dollars of loans still owed by former Corinthian students.
The CFPB and the Department of Education did secure nearly $480 million in loan forgiveness for Corinthian students earlier this year.
If you’re a former Corinthian Colleges student and you took out private Genesis loan, you can file a complaint with the CFPB here.
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