Debt relief for 350 Rochester-area students victimized by Corinthian College loan provider
About 41,000 Students Nationwide Will Receive $183 Million In Relief From Loans From Financial Services Company Aequitas Capital Management, Inc., Including About 350 Students At The Shuttered Everest Institute Rochester
A.G. Schneiderman Urges Eligible New York Students To Contact His Office For Additional Information On Loan Relief Settlement
Click Here For Video Of A.G. Schneiderman Discussing The Settlement
Attorney General Eric T. Schneiderman today announced that a coalition of state and federal agencies have reached a $183.3 million nationwide settlement with Aequitas Capital Management, Inc., a financial services firm under SEC-imposed receivership that provided loans to students at the now-defunct Corinthian Colleges. The settlement is subject to approval by the Oregon federal court overseeing the Aequitas receivership.
Approximately 350 New Yorkers, mostly former students at Everest Institute Rochester, will be eligible for a total of $2.4 million in loan relief under the settlement. The settlement, which will affect 41,000 students nationwide, was reached by a coalition including Schneiderman, 12 other state attorneys general, and the federal Consumer Financial Protection Bureau.
“Thousands of New Yorkers signed up at Corinthian College to build the skills they need to compete in today’s economy,” said Attorney General Schneiderman. “But Aequitas Capital Management took advantage of their ambition and schemed with Corinthian to saddle these students with high-default loans at the now-bankrupt college. This was nothing more than a sham that victimized unwitting students and deceived the government and taxpayers.”
Under the terms of the settlement:
- Borrowers who attended a Corinthian school when it closed in 2014 or who defaulted on their loans will receive full discharges of their Aequitas student loans, including any accrued interest (this group represents about 240 of the 350 New York borrowers)
- All other borrowers (approximately 110) will have 55% of their Aequitas loan discharged, including any past-due interest on the forgiven amount
Under the settlement, the average borrower will receive between $6,000 and $7,000 in loan relief.
Corinthian’s business model was heavily dependent on federal student aid. In order to qualify to receive these federal funds, however, federal Title IV regulations require for-profit schools to receive a certain portion of their revenue from sources other than federal student aid.
Prior to 2014, when Corinthian was in danger of falling below this required threshold of non-federal revenue, Corinthian entered into an arrangement with a private student loan company, Aequitas Capital Management. Under the arrangement, Aequitas provided private student loans to Corinthian students. Corinthian then agreed to buy back all loans that defaulted within a specified period, eliminating Aequitas’ risk of losses from defaults. The purpose of this arrangement was to make it appear that Corinthian was in compliance with Title IV regulations.
Aequitas knew that the loans provided no financial benefit to Corinthian other than allowing Corinthian to access federal funds for which they would not have otherwise qualified. Aequitas and Corinthian also knew that students were unlikely to be able to repay the loans, even as they continued making loans. The loans had default rates of 50 to 70 percent.
Aequitas benefited from its participation in this scheme to deceive the government because it retained those high interest loans that did not default.
Founded in 1995, Corinthian Colleges bought the Rochester Business Institute in 2006 and renamed it Everest Institute Rochester. The company’s business model relied heavily on aggressive marketing to students who qualified for federally subsidized student loans.
For years, the company was plagued by consumer complaints and regulatory actions alleging deceptive marketing and poor student outcomes. In 2014, in response to mounting evidence that Corinthian was engaging in misconduct, the U.S. Department of Education imposed a delay on the school’s receipt of federal aid. Soon after, most of its campuses were sold to a nonprofit. Thirty campuses, including Everest Rochester, closed.
In May 2015, Corinthian filed for bankruptcy. Students of closed schools were left with both public and private student loans.
In May 2015, A.G. Schneiderman and 10 other state attorneys general sent a letter to then-Education Secretary Arne Duncan expressing concern about insufficient information provided to students affected by the sudden college closure. The letter also urged the Department to provide debt relief to students who did not qualify for a “closed school” discharge, but were harmed by the school’s misconduct.
In April 2017, a US DOE investigation concluded that Corinthian misrepresented graduates’ employment success in connection with some of its programs. Based upon this finding, thousands of additional students became eligible for forgiveness of federal student loans they took out to attend Corinthian. A.G. Schneiderman’s office began notifying 3,000 New Yorkers who attended certain programs at schools operated by Corinthian, including Everest Rochester, that they were eligible for cancellation of their federal student loans.
However, as of June 2017, approximately 27,000 students nationwide who had been approved for loan forgiveness had yet to see their loans discharged due to delays by the US DOE. Some students are nearing the end of 12-month forbearances on their loans, and face restarting monthly payments on debts that should rightfully be canceled. On June 5, 2017, A.G. Schneiderman and 19 other attorneys general sent a letter to Secretary of Education Betsy DeVos urging the US DOE to speed up review of applications and finalize the discharge of loans where forgiveness has already been approved.
This case was handled by Special Counsel Carolyn Fast under the supervision of Laura J. Levine, Deputy Bureau Chief of the Consumer Frauds and Protection Bureau; Bureau Chief Jane M. Azia, and Manisha M. Sheth, Executive Deputy Attorney General for Economic Justice.
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Borrowers who may qualify for relief under this settlement can contact the Office of the Attorney General at 800-771-7755.
Borrowers should beware of student loan scams. You can apply for loan forgiveness, or get information on loan forgiveness, FREE through the US DOE. The US DOE never charges application or maintenance fees, so if you’re asked to pay, walk away.
It may take time for the DOE to process federal loan discharge applications, so anyone who applies for loan discharge should continue making payments on his or her loans until informed by the DOE or his or her loan servicer that the federal loans are in forbearance while the application is pending, or that his or her loans have been cancelled.
For additional information about federal loan discharges, students can visit here. Students can also call the US DOE’s hotline at 1-855-279-6207 or e-mail questions about discharge of their federal student loans to FSAOperations@ed.gov.