Corinthian College Must Pay Students $820 Million

Corinthian College Must Pay Students $820 Million

Corinthian Must Pay Students Student loans are hard enough to deal with when everything is aboveboard. Unfortunately, some programs aren’t entirely honest with their students. What happens when your school falsely advertises the programs it offers, misrepresents your job prospects, or uses unfair debt collection practices? Many students accused the for-profit Corinthian Colleges of doing just those things. Recently, a California judge agreed and awarded students more than $800 million.

The Corinthian College Lawsuit

California Attorney General Kamala D. Harris filed a suit against Corinthian College and it subsidiaries (Heald, Everest College, and WyoTech) in 2013, alleging that the for-profit schools had defrauded students. Harris claimed that the Corinthian schools had engaged in a predatory scheme targeting low-income students. The schools were accused of advertising programs they didn’t actually offer (like x-ray and dialysis technician programs), falsely inflating their graduates’ job placement rates to entice students to enroll, unlawfully using US military seals on advertising materials, misleading students about whether credits would transfer to the Cal State system, and engaging in illegal debt collection practices. Among other things, the schools barred students from attending class if they fell behind on loan payments.

San Francisco Superior Court Judge Curtis Karnow faulted Corinthian for all of this behavior and ordered the schools to pay $1.2 billion – over $350 million in civil penalties and $820 in restitution for students in a judgment delivered in March.

This isn’t the first legal trouble Corinthian has faced – early last year, the Department of Education levied a $30 million fine against Corinthian for overstating job placement rates. Then, the Consumer Financial Protection Bureau filed a suit against the school system alleging that it was engaged in predatory lending practices and inflating job placement numbers. A US District Court Judge agreed with the CFPB and ordered Corinthian to pay more than $500 million in restitution for students midway through last year.  After those decisions, Corinthian filed bankruptcy and has since closed its doors.

Corinthian Student Loans – What Happens Now?

What does all this mean for students? Many students that attended Corinthian got stuck with student loans but no degree, no job, and no credits that could transfer to other schools. Those students enrolled when Corinthian shut down were left with no way to finish their degrees.

The $820 million awarded in the recent California lawsuit will be distributed to students that attended schools in the Corinthian system in California from 2010 on. However, Corinthian may not actually have the money to pay that judgment. When they filed bankruptcy last year, they had about $20 million in assets and more than $100 million in debt, which means their assets were completely wiped out in bankruptcy. They sold some assets off and were able to repay some students as part of the $500 million judgment from the US District Court, but it’s possible that that’s the last of the money that will come out of the school.

In total, Corinthian students have borrowed about $3.2 billion in federal loans since 2010, so what can those students do? Are they stuck paying back loans they took out based on false advertising?

Student Loan Forgiveness Options

In most cases, it’s extremely difficult to get out of student loans – you can’t discharge them in bankruptcy unless you’re severely disabled. However, there are provisions of federal law that allow student loan forgiveness if you took the loans out based on false information. For example, if you borrowed money to take core classes and transfer them to the Cal State system and later found out the credits wouldn’t transfer, you might be able to apply for forgiveness of those loans.

As a result of those provisions, thousands of Corinthian students have applied to the federal government for student debt relief. So many, in fact, that the government has put together a guide specifically for Corinthian students on how to manage their loans. There are 2 different paths to relief: through a closed school discharge or through a “borrower defense to repayment.”

Close School Discharge

If you were attending Corinthian when it closed, you can apply for a “closed school discharge.” That will get you a full discharge of all of your federal loans and reimbursement for any amounts you’ve already repaid. To qualify, you have to meet 3 criteria:

  • You haven’t finished your program at a Corinthian school
  • You haven’t transferred your Corinthian credits to another, similar program (like switching your HVAC credits from Corinthian to another HVAC program)
  • You were either attending a Corinthian school when it closed or you withdrew from Corinthian on or after June 20, 2014

If you don’t meet all 3 of those criteria, you cannot qualify for a closed school discharge.

Borrower Defense To Repayment

If you don’t qualify for a closed school discharge, you may still qualify for a “borrower defense to repayment.” A successful borrower defense will get you a full discharge of your loans and reimbursement for what you’ve already paid. You’ll need to submit the following information via e-mail to or by mail to Department of Education, PO Box 194407, San Francisco, CA 94119:

  • A statement that you’re applying for a borrower defense to repayment
  • First, middle, and last name
  • Date of birth
  • The last 4 digits of the borrower’s Social Security number
  • Home address
  • Phone number
  • E-mail address
  • Name and location of the school
  • The program you were enrolled in
  • The degree or certificate you were pursuing
  • Dates of enrollment
  • Documentation to confirm your school, program of study, and dates of enrollment (transcripts and registration documents)
  • Details about how you believe the schools violated the law or defrauded you and any injuries (financial harm) you suffered because of it, along with any supporting documentation

Students at certain Heald, Everest, and WyoTech schools may be able to use a streamlined process to file their claims. Students from the listed Heald Schools can either apply online or send this application to or by regular mail to Department of Education, P.O. Box 194407, San Francisco, CA 94119. Students from the listed Everest and WyoTech schools can also apply online or send in this application to or by regular mail to Department of Education, P.O. Box 194407, San Francisco, CA 94119.

Once you’ve filed your borrower defense claim, you can request that your loans be put into “forbearance.” Forbearance means you won’t have to make payments until your claim is processed and if you’re already in default, collections will stop. However, you should not stop making payments until you receive notice that you’ve been approved for forbearance. Your loans will continue to accrue interest during forbearance.

If you have questions about borrower defense to repayment, the government offers a borrower defense hotline at (855) 279-6207 to answer your questions and help you decide if this is the right option for you.

 What To Do If You Attended A Corinthian School

If you’re stuck with loans you took out to attend a Corinthian school in 2010 or later, you may be able to get those loans wiped out and get your money back. The student loan relief process is complicated and can take a lot of paperwork, but it does give you a way to get out of your student loans and get your money back. To get started, call the Federal Office of Student Aid at 1-800-433-3243 and ask them about your options.


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