WASHINGTON ― A government plan to wipe out loans for many of the students who attended the now-disgraced for-profit Corinthian Colleges raises serious questions about whether the White House or Congress should have done more to prevent the debacle.
Education Secretary Arne Duncan on Monday announced that the government would make it easier for former Corinthian students to erase their debt. About $3.6 billion in federal loans has been given to these students since 2010. That potentially puts the taxpayer on the hook for that amount, although officials say it’s unlikely that every loan will qualify for relief.
At the very least, the government is looking at footing the bill for hundreds of millions of dollars in student debt in what has become a major consumer bailout. Some advocates say the government should have done more sooner to intervene, while others are questioning the latest approach.
“Students have been hurt, but the department is establishing a precedent that puts taxpayers on the hook for what a college may have done,” said Sen. Lamar Alexander, R-Tenn., who chairs the Senate Education Committee.
Alexander said one of the problems has been an inherent conflict of interest with having the Education Department provide loans and regulate colleges.
“If your car is a lemon you don’t sue the bank that made the auto loan; you sue the car company,” he said.
Corinthian Colleges was one of the largest for-profit schools when it nearly collapsed last year and became a symbol of fraud in the world of higher education and student loans. According to investigators, Corinthian schools charged exorbitant fees, lied about job prospects for its graduates and, in some cases, encouraged students to lie about their circumstances to get more federal aid.
