Students Ask Education Department to Discharge College Debt

Almost 12,000 students are asking the federal government to discharge their college loan debt, asserting that their school either closed or lied to them about job prospects, according to government data released Thursday. Already, claims totaling about $40 million in loans have been approved.

That’s only a fraction of the potential cost to taxpayers if all the students affected by the collapse of Corinthian Colleges file claims. Education Department Under Secretary Ted Mitchell said the potential student loan relief could total $3.2 billion.

The claims already filed represent an unprecedented spike in what’s called a “borrower’s defense” claim following the collapse of Corinthian Colleges, a for-profit college chain that had become a symbol of fraud in the world of higher education. Department regulations allow students who believe they were victims of fraud to apply to have their loans discharged.

Officials say they knew of five or so such cases in the past 20 years; some 4,140 have been filed since the Education Department’s June announcement that it would make the debt-relief process easier. Officials say an additional 7,815 Corinthian students have filed claims for debt relief because their school closed.

Of those closed school claims, the department said 3,128 had been approved, totaling about $40 million in student loans. <Read more.>

Via Anne Flaherty, Associated Press on Diverse Issues in Higher Education.