Texas residents may be aware that several for-profit colleges have been criticized for burdening their students with excessive debt. The debt issue along with poor graduation rates and limited job prospects for students who do manage to graduate led to a government crackdown in 2010. A bankruptcy filing on May 4 by Corinthian Colleges, which had been one of the nation’s leading for-profit higher education companies, left approximately 78,000 students in an uncertain situation, but a June 8 announcement by the U.S. Department of Education indicates that many of them will see their debt forgiven.
The announcement also included details of a plan that would forgive the loans of any student who had been defrauded by their college. The cost of forgiving the Corinthian students’ debt is expected to be approximately $544 million. Observers say that the government has never before offered debt relief to such a large group of students.
The plan also extends the eligibility period for a closed-school discharge of federal loans by approximately six months for Corinthian’s students. These discharges are usually available to students who left a school up to 120 days before it closed, but the secretary of education says that students who left Corinthian schools on or after June 20, 2014 will qualify. Corinthian closed its last campus on April 26.
Many former college students struggle to find a job that pays enough to cover their basic living expenses and meet their loan obligations. While student loans cannot generally be discharged in a bankruptcy, many other burdensome financial obligations may be. An attorney could explain the various debt relief options available to such borrowers and could also point out that filing for bankruptcy will put at least a temporary end to creditor harassment while providing the opportunity for a financial fresh start.