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Consumer bureau wins $531 million lawsuit against Corinthian Colleges


After more than a year of legal tap dancing by Corinthian Colleges, half a billion dollars or to be exact, $531,224,267 of financial justice has been ordered for students who attended the now-defunct private college. On Oct. 27, a federal court issued a default judgment against the former institution for a predatory lending scheme that was as illegal as it was abusive.

While the bankrupt Corinthian does not have the means to pay the judgment, the ruling should provide a basis for students attending the for-profit college to seek relief from the Department of Education for the debts they took out to attend a school of questionable value.

The Consumer Financial Protection Bureau (CFPB) sued Corinthian Colleges in September 2014 for luring thousands of students into borrowing its high-cost, private label Genesis loans. More than 60 percent of Corinthian borrowers defaulted on these loans within three years. And—unlike other student loans—Corinthian required repayment to begin while students were enrolled. When the institution deemed it necessary, its staff assumed the role of debt collector as well.

According to the order issued by U.S. District Court’s Judge Gary Feinerman, “From approximately March 2008 through July 2014, Corinthian created and marketed the Genesis loan program to students so that Corinthian could charge its students more in tuition than would be covered by Title IV funding from the United States Department of Education (ED). Corinthian did this because ED required schools like Corinthian to obtain at least 10 percent of their revenues from sources other than Title IV funds.”

“Thus in order to continue receiving those funds, which was the main source of Corinthian’s revenue,” the order continues, “Corinthian burdened its students with this additional cost.”

Corinthian’s tuition costs were so high that an associate degree came with a price tag ranging from $33,000 to $43,000. The costs for a bachelor’s degree ran higher, from $60,000 to $75,000. Because of these high costs, students needed to borrow a combination of federal and private loans to cover expenses.

The investment students made in their education did not pay off. CFPB’s lawsuit also accused Corinthian of bogus advertising that promised jobs and career services that never happened.

If you’re like me, you’re fuming at the thought of taxpayers footing the bill for a “college” that gave its students more debt knowledge than marketable skills. Students of color disproportionately enroll in for-profit institutions like Corinthian compared to their White peers, who are more likely to attend either public or private, nonprofit schools.

Sensible people feel the hurt caused to students of color who were lured into these institutions and usually received no degree, no skills but tens of thousands of dollars of debt.

For several years, Corinthian Colleges were among the nation’s largest for-profit schools, operating under several brands—WyoTech, Heald College and Everest College.

Last year, the Center for Responsible Lending (CRL) released findings that indicated how high-cost, for-profit colleges make millions each year by targeting students of color. For details visit webiste—that found. Although for-profit colleges actually enroll only 13 percent of all college students, they account for nearly half of all student loan defaults.

“For-profit colleges have positioned themselves as a means for traditionally underserved students of color to achieve educational success and thus to increase their ability to earn higher incomes, and build wealth,” states the report. “If these schools do not engender better outcomes for their students and instead merely saddle students with debt, then the access these schools provide could prove to widen existing income and wealth gaps, rather than to narrow them.”

“The Department of Education needs to act swiftly and robustly to provide relief to defrauded Corinthian students,” said Whitney Barkley, counsel policy with the Center for Responsible Lending policy counsel. “The current system puts all the risk of fraud and financial harm on students and taxpayers. But fairness demands a remedy, when a college has been conclusively found to have engaged in such widespread fraud.”

“We all have much more work to do before current and past students who were hurt by Corinthian’s illegal practices can be made whole,” noted CFPB Director Richard Cordray. “We remain deeply concerned about risks facing student borrowers in the for-profit space and will continue to be vigilant in rooting out harmful practices.”

Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at

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