Student loan debt is still a heavy burden for millions, but there are now around 41,000 former students whose debt has disappeared.
In a settlement with federal and state agencies, Aequitas Capital Management, Inc., a financial services firm in receivership, will make refunds to the 41,000 students who borrowed money to attend the for-profit, and now defunct, Corinthian Colleges.
The settlement is in the final stages and must win approval from the court in Oregon that is handing the Aequitas bankruptcy.
“Thousands of New Yorkers signed up at Corinthian College to build the skills they need to compete in today’s economy,” said New York Attorney General Eric Schneiderman. “But Aequitas Capital Management took advantage of their ambition and schemed with Corinthian to saddle these students with high-default loans at the now-bankrupt college. This was nothing more than a sham that victimized unwitting students and deceived the government and taxpayers.”
Who gets a refund
Under the terms of the settlement, students who borrowed money from Aequitas Capital to attend a Corinthian school, and were attending when it closed in 2014 -- or who defaulted on their loans -- will receive a full discharge of their student loans. That includes any accrued interest.
A small number of borrowers won't receive a full discharge of their loans, but will have around 55% of the amount forgiven. Schneiderman says the average student loan borrower will get $6,000 and $7,000 in loan relief.
Schneiderman says Aequitas Capital was brought into the picture when Corinthian was in danger of having too many of its students reliant on federal aid under Title IV. Students then got private student loans through Aequitas, which allegedly had a deal with Corinthian to buy back loans in default. Schneiderman says the purpose was to make it appear Corinthian was in Title IV compliance.
“These were sham loans used by for-profit schools and lenders to access federal taxpayer dollars to fund programs that did nothing to help students get ahead,” said Illinois Attorney General Lisa Madigan.
Madigan says that after Corinthian could no longer make payments to Aequitas as agreed, the hedge fund was left holding a large inventory of loans that students could not repay. At that point, the Securities and Exchange Commission (SEC) took notice and declared the arrangement a Ponzi scheme. Aequitas failed in 2016 and was taken into SEC receivership.
If you are a former Corinthian student with student loan debt and believe you might be eligible for loan forgiveness under the terms of the settlement, contact your state attorney general to learn more. You can find your attorney general's contact information here.