Last summer the federal government started cracking down on Corinthian College, the for-profit chain behind Everest Institute, WyoTech and Heald schools. Corinthian was already under investigation in 20 different states by last June, when the Department of Education temporarily suspended all federal financial aid to Corinthian schools.
In July, Corinthian missed a deadline to reach an agreement with the federal government, and started selling off some of its campuses. In September, the feds sued Corinthian for predatory lending practices against its students, and only a couple of weeks ago, the Department of Education and Consumer Financial Protection Bureau jointly announced that certain Corinthian students would be forgiven a collective $480 million worth of private, high-cost “Genesis” loans.
Despite all of this, many former Corinthian students still find themselves saddled with enormous debts for worthless degrees — in many instances, their Everest or Corinthian credits won't transfer to other schools, and employers are rarely impressed by Corinthian-generated credentials.
Also, student-loan debt is worse than most other forms of debt because it is bankruptcy-proof, to ensure that teenagers and young 20-somethings who go over their heads in debt attending the wrong school face much harsher consequences than, say, middle-aged adults who go over their heads in debt trying to profitably “flip” a house, charging too many luxe vacations on their credit cards, or gambling all their money away at the legal casino nearest them – those poor financial choices can be forgiven in bankruptcy, but student debts cannot.
Last week, 15 former Corinthian students associated with an offshoot of the Occupy movement known as the Debt Collective announced that they were staging a “debt strike” and refusing to repay their student loans in order to protest the government's legal and financial support of the company.
On the Debt Collective's “Student Strike” page, the “Corinthian 15” posted an open letter to the Department of Education saying that:
Who are we? We are the first generation made poor by the business of education.
We are people living paycheck to paycheck, single mothers, and young people just starting out. We wanted an education because we were driven to learn and to achieve a better life for ourselves and for our families.
We trusted that education would lead to a better life. And we trusted you to ensure that the education system in this country would do so. But Corinthian took advantage of our dreams and targeted us to make a profit. You let it happen, and now you cash in. … We are not alone in this fight. Corinthian’s predatory empire pushed hundreds of thousands into a debt trap. But even beyond for-profit schools, tens of millions of students are in more debt than they can ever repay. And you are the debt collector, with powers beyond a payday lender’s wildest dreams. …
The Corinthian 15 might have legitimate legal grounds to demand the discharge of their loans. Even some U.S. senators think so.
Last December, six senators led by Elizabeth Warren (D-Mass.) wrote to Education Secretary Arne Duncan, urging that the Department of Education “immediately discharge” the federal debt obligations of former Corinthian students.
The letter pointed out that such cancellations are allowed according to the DoE's own rules: when students sign the documents to take out a federal student loan, the fine print says that “In some cases, you 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.”
Warren's complete letter to Duncan is available in .pdf form here.
The New Yorker spoke to Mallory Heiney, one of the Corinthian 15 who attended a Michigan branch of Everest Institute in hope of becoming a nurse. But, she said, her instructors stopped showing up for classes due to Corinthian's financial troubles.
Inside Higher Ed spoke to another member of the Corinthian 15, Makenzie Vasquez, who said she dropped out six months into an eight-month program because she could not afford payments on the private loan offered by Corinthian, and now owes more than $30,000 in debt.
The federal government does offer certain income-based repayment programs for low-income students burdened by excessive student loan debt. Vasquez says she knows about such programs but says that, as a matter of principle, she does not want to repay the loans: “I didn’t get anything for this money, so I don’t see why I should have to give them anything …. I was conned going into this school. They sold me a dream and I got a nightmare.”
Educators generally advise consumers thinking of enrolling at a for-profit school to consider their local community college instead. Almost all community colleges will allow you to take on a part-time rather than full-time courseload, if necessary, so you can still work while attending school, and even pay your tuition and other costs as you go, rather than take on a student-loan debt that can't even be discharged in bankruptcy.