The Department of Education may forgive the loans of students who have attended fraudulent and shut-down for-profit colleges. For example, Corinthian Colleges recently sold off its remaining locations, becoming a defunct company.
Students attending institutions operated by Corinthian Colleges at the time of its closing could have their federal student loans forgiven. The Department of Education allows for forgiveness on student loans if borrowers are attending at the time their schools close. However, many former students who attended the institutions operated by Corinthian Colleges were unable to take advantage of this protection.
Regardless, these former students and graduates may still be offered loan forgiveness. The Department of Education may use a 20-year-old rule that forgives the loans of students who have been defrauded under state laws. The “borrower defense to repayment” protection could save the financial futures of many former Corinthian Colleges students.
What is the “Borrower Defense to Repayment” Protection?
This little-known avenue for student loan forgiveness helps protect borrowers from fraud. On its website, the Department of Education tells borrowers what they will need to file a claim under the borrower defense to repayment protection. Students who attended for-profit schools that used fake statistics or false accreditation information to gain more business might be able to take advantage of this offer from the Department of Education.
Although we frequently discuss how student loans are in dire need of normal bankruptcy protections, there are additional methods for shedding higher education debt. For-profit colleges around the country have been accused of using fraudulent practices for improving admission rates, and it is possible the “borrower defense to repayment” option could become more widely used in the coming months.