A senior Education Department official will meet Tuesday with former students of the collapsed for-profit college chain Corinthian Colleges who are refusing to pay back their student loans.
The department has largely remained silent as the Corinthian "debt strike," which has expanded from 15 to 100 former students, gained steam. The strike is part of a broader effort to pressure the government into forgiving the debt of former students of the controversial college chain, which is in the process of shutting itself down in the wake of lawsuits and investigations. The strike has gained supporters in Washington and nationally, with several prominent legislators criticizing the Education Department for bailing out the struggling for-profit college operator last summer, but continuing to hold students on the hook for their loans.
Former Corinthian students said those loans were taken out because of aggressive and misleading sales practices by the by Everest — allegations backed up by a number of state-level investigations into bad behavior by the company.
Now, it appears some of those complaints will get a hearing. The Education Department will join a meeting between the group of debt strikers, who have swollen in number in the past weeks and now call themselves the Corinthian 100, and the Consumer Financial Protection Bureau, which is waging a lawsuit against Corinthian for unfair lending practices.
The Corinthian 100 were organized by the Debt Collective, an activist group that is an offshoot of the Occupy Wall Street movement. The Debt Collective has said it hopes to use the Corinthian debt strike to spearhead a broader resistance to student debt nationwide.
The Debt Collective will also officially launch a legal strategy Tuesday, submitting hundreds of "defense to repayment" claims to the Education Department on behalf of former Corinthian students. The claims are based on a little-known and almost completely unused clause in department statute which says that borrowers "may assert as a defense against collection of your loan, that the school did something wrong or failed to do something that it should have done." The school's actions, the clause reads, must be so egregious that they would "give rise to a legal cause of action against the school under applicable state law."
A group of prominent legislators, led by Senator Elizabeth Warren, and two state attorneys general have written letters urging the Education Department to consider the validity of "defense to repayment" claims by former Corinthian students. Corinthian is being sued for illegal practices and predatory lending schemes by attorneys general in California, Massachusetts and Wisconsin and the Consumer Financial Protection Bureau, and investigated by 11 more state attorneys general, the Education Department, and the Department of Justice.
The Debt Collective has built a form on its website to collect, and eventually distribute, defense to repayment claims by former students. A Debt Collective representative said the group planned to submit more than 300 such claims to the Education Department Tuesday.