Office of the Attorney General
Attorney General Conway Announces Multistate Push to Discharge For-Profit Student Loans

Press Release Date:  Tuesday, August 18, 2015  
Contact Information:  Leland Hulbert
Deputy Communications Director
502-696-5659
 


Attorney General Jack Conway announces a joint effort to bring state-level voices to a national debate on how best to help students victimized by Corinthian Colleges and other predatory for-profit schools.  Today, 11 state attorneys general called on the U.S. Department of Education to cancel federal student loans in cases where schools have broken state law and provide clear processes for students seeking relief.  Attorney General Conway joined the multistate effort making several recommendations to the U.S. Department of Education on the structure of its newly-formed debt relief program.

“The Department of Education must recognize the serious threat some for-profit colleges pose to students and work toward protecting students against future harm,” said Attorney General Conway.   

The letter was sent to U.S. Secretary of Education Arne Duncan and the recently appointed Special Master Joseph Smith, who is charged with reviewing the debts of students who attended Corinthian schools and establishing state law discharge procedures.  The letter requests that the state attorneys general be included in the planning process.

“The state Attorneys General are experts in the state trade practices laws that must be applied in considering state law based defenses to repayment, and many of our offices have investigated and developed evidence of unlawful acts perpetrated by schools against students in our states,” the letter states.

The letter raises a number of concerns about the Department of Education’s state law discharge process and offered a number of recommendations, including:

• Easing the burden on students to achieve relief: Borrowers should have a clear process for applying for a discharge of their loans based on violations of state law. Students should simply have to state how the school deceptively induced them to enroll or how the school engaged in other unlawful acts. The Department should not demand additional materials from students, aside from asking when they enrolled and whether they incurred federal loans while attending their schools. 

• Allowing attorneys general to make showings of state law violations: As part of the review process, the Department should invite interested Attorneys General to provide supporting materials regarding the school’s unfair or deceptive practices. While many consumers have been victimized by for-profit schools, they are often in a poor position to prove that the schools committed unfair or deceptive practices. 

• Discharging loans of groups vs. individual students: Provide a mechanism by which the loans of entire cohorts of students may be discharged. The Department should accept findings or evidence from government entities on behalf of the students. 

• Ensuring relief regardless of loan status:  The Department should clearly state that discharges are available for Direct loans, the Federal Family Education Loan Program loans, the PLUS program loans, and loans that have been consolidated into new debt.  The Department should also make clear that students may recover amounts already paid on Title IV loans.

In addition to improving the process for state law discharges, the attorneys general asked the Department to ensure immediate relief to Corinthian borrowers, and address eligibility problems concerning the implementation of the closed school discharge program as it relates to Corinthian loans.

In April 2015, Attorney General Conway and eight other attorneys general sent a letter to Secretary Duncan expressing the importance of defense to repayment for student borrowers at for-profit schools that have broken state law. On June 8, the Department announced its new debt relief process for Corinthian students and later than month announced the appointment of Joseph Smith as Special Master.

Today’s letter was joined by the attorneys general of Massachusetts, California, Connecticut, Illinois, Kentucky, Maryland, New Mexico, New York, Oregon, Pennsylvania, and Washington.

To view a copy of today’s letter, please visit:  http://goo.gl/MYgnkO

For more information about students’ rights under the closed school discharge (forgiveness) of their student loans please see: https://studentaid.ed.gov/repay-loans/forgiveness-cancellation/closed-school