I took federal student loans to attend a Corinthian College. What can I do?
Dear Credible Money Coach,
I need advice in consolidating my student loans that accrued interest since 2010. I have two types of loans from the Education Department and Nelnet. My school, Heald College, was a part of for-profit Corinthian Colleges that is now defunct. What can I do? Thank you in advance for your help. — Jale
Hello Jale, and thank you for your question. Rarely when answering reader questions do I have the opportunity to deliver unmitigated good news. But here goes … you’re probably off the hook for those loans.
That’s because on June 1, 2022, the U.S. Department of Education announced it will discharge $5.8 billion in federal student loan debt for borrowers who attended a Corinthian Colleges institution — including Heald College.
Since you say your loans are federal, through the Department of Education and its servicer, Nelnet, you’re likely one of the fortunate 560,000 borrowers who will benefit from the discharge.
It’s important to understand, though, that this discharge only applies to federal student loans. If you have private student loans that you may want to consolidate by refinancing into a single loan with a lower interest rate, it’s a good idea to compare your options using a marketplace like Credible.
What to know about the discharge
As you mentioned in your question, Corinthian Colleges was a for-profit educational institution. It opened in 1995 and closed 20 years later. At one point, Corinthian operated more than 100 campuses across the country.
Both the Department of Education and the California Attorney General’s office investigated Corinthian over a period of years. In its statement announcing the discharge early last month, the education department said Corinthian "engaged in widespread and pervasive misrepresentations related to a borrower’s employment prospects, including guarantees they would find a job."
The department also says the institution misled students about their ability to transfer credits from another school, and faked the school’s job placement rates.
That type of misrepresentation can qualify federal student loan borrowers to have their loans discharged. And that’s exactly what the Department of Education is doing for borrowers who took out federal loans to attend Corinthian Colleges.
How to get the discharge
Jale, here’s some even better news: The Department of Education says you won’t have to do anything to have your federal student loans fully discharged.
"The Department will soon begin notifying students who attended Corinthian of this decision, with the actual discharges following in the months after," the department’s statement says. "Borrowers will not have to take any actions to receive their discharges."
That said, if you haven’t heard anything in a few months, you might consider reaching out to your loan servicer, your state attorney general’s office, or your state’s department of education to see if they can offer any help.
What you can do about private student loans
Unfortunately, this discharge doesn’t help borrowers who took out private student loans to attend a Corinthian school. The Department of Education doesn’t have the power to discharge private student loans.
However, because federal and state governments have taken action against Corinthian Colleges, a private lender may be willing to offer some relief to borrowers who used a private loan to pay for attending one of the defunct schools. If you have a private student loan, you’ll have to reach out to the lender to see what, if any, relief is available.
If your lender is unwilling to help you out, refinancing your private student loan into one with a better interest rate and terms may be a way to manage the debt. You may be able to qualify for a better interest rate, especially if you have good credit.
Ready to learn more? Check out these articles …
- Student loan forgiveness scams are on the rise, CFPB warns
- 10 companies that help you repay your student loans
- What student loan forgiveness might mean for your student loans
- How to decide if you should refinance your student loans as interest rates rise
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About the author: Dan Roccato is a clinical professor of finance at University of San Diego’s Knauss School of Business, Credible Money Coach personal finance expert, a published author, and entrepreneur. He held leadership roles with Merrill Lynch and Morgan Stanley. He’s a noted expert in personal finance, global securities services and corporate stock options. You can find him on LinkedIn.