The U.S. Department of Education is automatically erasing $5.8 billion in student loan debt for more than 560,000 borrowers in what the government is calling the largest single loan discharge ever.
The decision means hundreds of thousands of students who attended the for-profit Corinthian Colleges chain from its founding in 1995 through its closure in April 2015 will get their federal student loans canceled with no further action on their part.
"Every student deceived, defrauded, and driven into debt by Corinthian Colleges can rest assured that the Biden-Harris administration has their back and will discharge their federal student loans," U.S. Secretary of Education Miguel Cardona said in a statement.
Corinthian -- which operated campuses under the brands Everest, Heald College and Wyotech -- engaged in widespread and pervasive misrepresentations related to a borrower's employment prospects, including guarantees they would find a job, according to the government. Corinthian also made pervasive misstatements to prospective students about the ability to transfer credits and falsified their public job placement rates. At its peak in 2010, it enrolled more than 110,000 students at 105 campuses.
In 2016, following years of investigations, then-California Attorney General Kamala Harris and the state of California obtained a more than $1 billion judgment against Corinthian, in which the judge found that the company misrepresented job placement rates, its program offerings, and whether students could transfer credits, among many other false or misleading actions.
"For far too long, Corinthian engaged in the wholesale financial exploitation of students, misleading them into taking on more and more debt to pay for promises they would never keep," Cardona said.
The Education Department will soon begin notifying students who attended Corinthian of this decision, with the actual debts to be wiped clean over the next several months. Borrowers will not have to take any actions to receive their discharges. The action does not apply to loans paid in full.
While authorities are calling the decision a win, they add that more work needs to be done to protect vulnerable students in the long run.
"The Department of Education is actively ramping up oversight to better protect today's students from tactics and make sure that for-profit institutions – and the corporations that own them – never again get away with such abuse," Cardona said.
Including this group discharge, the government has now approved $25 billion in loan forgiveness for 1.3 million borrowers.