What's the old joke? Oh, yes: What are the five most important words an English major will need to know after graduation? Answer: "You want fries with that?"
Not really funny for English majors, but absolutely not funny for recent graduates of any of Corinthian Colleges Inc.'s various institutions. Corinthian closed all of its schools last year, thanks in large part to a federal investigation into the company's tendency to overstate job placement numbers and other information. The students relied on the for-profit company's information and enrolled in programs that cost a lot of money and failed to deliver the promised skills.
We have been discussing the student loan debt accumulated by Corinthian's students and a couple of ways the federal government, including the IRS, have tried to help. In our last post, we talked about the Closed School Program. The program offers loan discharge for closed schools, and the Department of Education has added specific relief for Corinthian students.
The Closed Schools Program, however, does not apply to graduates. They may qualify for the defense to repayment process, and, if they qualify, the IRS' amended rules (discussed in our last post) for closed school loans will apply.
The defense to repayment process, however, is more complicated than the closed school program. Each borrower must file a claim with the Department of Education asserting that he or she was a victim of fraud. The department has agreed to expedite the process for Corinthian borrowers by using as evidence the findings of its own investigation. And, the department has agreed to halt collection efforts for borrowers who have already defaulted on their loans -- while their claim is being processed.
What borrowers need to know, though, is that the borrower defense only applies to federal Direct Loans. Federal Family Education Loan Program loans are apparently not eligible, according to StudentAid.gov. Without the cooperation of the lenders, then, the borrowers could still owe a lot of money.
At least one good thing came out of the Corinthian mess. The Education Department has agreed to develop regulations that will help to clarify as well as to streamline the borrower defense process. The key is to continue to protect consumers from the kind of misrepresentation that Corinthian allegedly indulged in. One idea: Rather than taxpayers taking the hit, the schools themselves would pay some portion of the outstanding student loan debt.
Source: Accounting Today, "IRS Gives Tax Break to Former Corinthian College Students," Michael Cohn, Dec. 4, 2015