Effect of Corinthian Colleges’ Closure on Student Financial Aid: Frequently Asked Questions Page: 7 of 10
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Effect of Corinthian Colleges' Closure on Student Financial Aid
neither finish their program of study through a teach-out nor transfer the credits they earned at a
CCI school to another school in a similar program. Additionally, ED expanded the withdrawal
timeframe for students who attended those CCI schools that closed in April 2015. ED will now
permit those students who withdrew from those schools after June 20, 2014, to have their Title IV
student loans discharged due to school closure.'4
Borrowers who are eligible for this type of relief must fill out the Closed School Loan Discharge
Application and return it to their loan servicer.'5 While their applications are being considered,
borrowers are required to continue making payments of their loans, although loan servicers are
permitted to grant forbearance16 until a decision is made. Additionally, to obtain discharge a
borrower must cooperate with ED in any judicial or administrative proceeding brought by ED to
recover amounts discharged from the school. '" If a borrower fails to cooperate with ED, the loan
discharge may be revoked.'"
Borrower Defense Against Repayment
Borrowers who attended a CCI school that was purchased by Zenith and borrowers who attended
a CCI school that closed but who are ineligible for closed school loan discharge may seek debt
relief on their FFEL or DL program loans by asserting certain defenses against repayment.19 In
certain circumstances, borrowers of DL program loans may be able to assert as a defense against
repayment of their loan "acts or omissions of an institution of higher education," as specified in
regulation.20 ED has determined in regulation that such acts and omissions are those that would
"give rise to a cause of action against the school under applicable State law."2'
14 U.S. Department of Education, Federal Student Aid, "Information about Debt Relief for Corinthian Colleges
Students," https://studentaid.ed.gov/sa/about/announcements/corinthian, accessed June 9, 2015.
15 The Secretary is required to mail to each borrower a discharge application and an explanation of qualifications and
procedures for obtaining a discharge. 34 C.F.R. 385.215(f)(3).
16 Under forbearance, a borrower is able to stop making payments or reduce their monthly payments on their federal
student loans for up to 12 months. During this time, interest continues to accrue on subsidized and unsubsidized loans.
17 For instance, the borrower may be required to provide testimony supporting a request for discharge.
18 34 C.F.R. 685.214(c) & (d).
19 Regulations for the FFEL program provide instances in which an FFEL program loan may be legally unenforceable,
such that a borrower need not repay it. While the language of the FFEL program regulations does not specifically
identify acts or omissions by an institution as a defense against repayment, ED has stated that the claims a borrower
could bring as a defense against repayment under the FFEL program are the same as those that could be brought under
the DL program. See U.S. Department of Education, "Notice of Interpretation," 60 Federal Register 37769-37770, July
21, 1995. There are no similar provisions related to borrower defenses for Perkins loans. However, the HEA grants the
Secretary authority to "enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand ...", which it
appears could effectively give the Secretary discretion to discharge student loans when appropriate under these two
programs. HEA 432(a)(6), 468(2). As of academic year 2013, the Wyotech Laramie campus was the only CCI
school participating in the Perkins Loan program.
20 HEA 455(h).
21 34 C.F.R. 685.206(c). In the instance of CCI, a cause of action under state law might include alleged violations of
state consumer protections laws. Several states' attorneys general have brought cases against or are investigating CCI
for such violations. See Letter from Jack Conway, Kentucky Attorney General, George Jepson, Connecticut Attorney
General, and Douglass S. Chin, Hawaii Attorney general, et al. to Arne Duncan, U.S. Secretary of Education, May 13,
2015, http://ag.ky.gov/pdfnews/corinthian-letter.pdf. The borrower is not required to sue or obtain a judgment against
a school in state court to be able to assert the defense; rather, he or she must be able to prove to ED the elements
required to establish the claim under relevant state law. Letter from Elizabeth Warren, Honorable, et al. to Arne
Duncan, Secretary U.S. Department of Education, December 9, 2014.
Congressional Research Service
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Effect of Corinthian Colleges’ Closure on Student Financial Aid: Frequently Asked Questions, report, June 17, 2015; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc821006/m1/7/: accessed January 20, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.