Corinthian College Sues for Forged Student Loan Debt Relief – FTC Finds Colleges in Violation of Law

The “Corinthian Colleges lawsuit” has received widespread attention recently. Since the recent high-profile collapse of the Corinthian Colleges for-profit college system, many other for-profit schools have faced severe financial difficulties. While there are certainly isolated incidents of fraud and predatory lending at these institutions, there are in fact a wide range of problems that can be found throughout the system. Many students who were mislead by misleading advertising and low-quality education are suffering because of it, and thousands of dollars in federal loans and grants have been awarded to the victims of these fraudulent acts.

Corinthian Colleges is just one of many colleges that have been targeted in this massive number of lawsuits. The Corinthian Colleges lawsuit was originally filed in July of 2021 by two former students who had attended Corinthian Colleges as students over two decades ago. They alleged that Corinthian Colleges repeatedly deceived them about their ability to transfer to six original credit programs, misrepresented their ability to transfer hundreds of thousands of dollars in student loan debt and repeatedly violated the rights of former students. This case represents the latest in a series of high-profile lawsuits targeting schools like Corinthian Colleges, ITT Technical Institute and Kaplan University that are accredited by the Commission on Accreditation of Schools and Programs (CASP).

The two plaintiffs in this current lawsuit are asking the court to order the corporation to immediately cease its deceptive practices and offer a class action lawsuit against it and its former students. The lawsuit asks that the corporation provide notice that it will begin enrolling new students into a modified student loan program in six months. It is also asking the court to allow students currently enrolled in the Corporation’s for-profit colleges to continue this class action status and receive up to three hundred percent discounts on their loans. Finally, it is asking the court to preclude current Corinthian students from filing any new class action lawsuit against the corporation until it resolves all current claims. Thus far, this request has been denied by the courts.

In response, Corinthian has announced that it will settle all current claims through arbitration and restricted its admissions process to current students. However, it is not clear what criteria it uses in selecting its arbitrators or whether these standards would be any different than the standard for-profit college programs. Further, Corinthian is also claiming that there is no proof of financial mismanagement or fraud by Corinthian Colleges and has offered the court eight million dollars in bonuses to employees as a result of settling the lawsuit. While it is unknown if these bonuses are based on actual monetary losses from the for-profit college’s operations or merely on bonuses paid to specific employees, it is currently unclear whether this sum of money represents an actual loss for Corinthian Colleges or simply a company perk. Additionally, the class action status of the lawsuit raises questions about the treatment of other similar corporations that have settled on prior occasions without actually proving themselves guilty of wrong doing.

Corinthian’s announcement comes at a time when for-profit colleges are facing intense criticism from the government over their deceptive marketing strategies. The investigation into Corinthian Colleges was begun as part of a broader probe by the Consumer Financial Protection Bureau. According to the bureau, Corinthian Colleges “doorwayilled” into federal student loan debt relief programs because they were counting on lax lending regulations to allow them to enroll large numbers of students without providing any real information to students about their potential success as borrowers. As a result, Corinthian Colleges received thousands of dollars in secret settlements from the government in exchange for agreeing to settle their case with the government over multiple lawsuits. In the case of Corinthian Colleges, the FTC found that the school did not provide sufficient evidence that it could successfully settle its claims with the government over the past few years.

The settlement offers from Corinthian Colleges, come at a time when for-profit colleges are facing significant pressure from the FTC. The Department of Education has released a report detailing numerous cases of for-profit schools defrauded the government through deceptive advertising and illegal debt collection practices. In recent years, the number of for-profit colleges facing federal investigation has nearly doubled. If you are interested in receiving student loan forgiveness, you should contact a trained advocate who can help you navigate the process.