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April 9, 2015

AG Jepsen Joins Multistate Effort Urging Federal Agency to ProvideRelief for Students of Predatory For-Profit Schools

Attorney General George Jepsen today joined a multistate effort urging the federal Department of Education to take immediate steps to assist student borrowers who have been harmed by for-profit colleges and to immediately relieve borrowers of the obligation to repay federal student loans incurred as a result of violations of state law by Corinthian Colleges, Inc.

In a letter sent to Secretary Arne Duncan, the attorneys general of nine states – California, Connecticut, Illinois, Kentucky, Massachusetts, New Mexico, New York, Oregon and Washington – urge the Department of Education to establish clear systems to help individual student borrowers obtain relief.

The attorneys general said that it is within the department's existing legal authority to help students who have been harmed by for-profit schools and that the Higher Education Act, department regulations and federal student loan documents all make clear that students can assert legal claims against schools as a defense to repayment of their loans.

"The problems with large, predatory for-profit schools are not exclusive to Connecticut," said Attorney General Jepsen. "Students across the country are coping with high student loan debts that they incurred after aggressive sales tactics and deceptive marketing practices that exploited their hopes and dreams of achieving a quality education. Corinthian relentlessly pursued potential students – including veterans, single parents and first-time higher education seekers – promising jobs and high earnings in order to secure federal funds. But Corinthian was hardly the only institution engaging in these practices, which is why it is critically important for the Department of Education to step up and provide relief to those who need and deserve it."

In addition to addressing Corinthian loans, the attorneys general suggest that the department clarify the grounds needed for students to discharge their loans and specify the process for students to obtain relief. They also suggest developing a process that would warrant defense to repayment for all affected students when an attorney general's investigation finds a for-profit school in violation of state law.

Attorneys general in several states and the federal Consumer Financial Protection Bureau have alleged in lawsuits that Corinthian made significant misrepresentations to students, including:

  • The availability of advertised programs and urgency of enrollment to secure a spot in a program;

  • The nature, character and quality of educational programs;

  • The earnings of graduates and the school's success in placing students in jobs within their field of study;

  • The school's role in its private loan program;

  • The school's purported affiliation with the United States Military;

  • The transferability of credits; and

  • The nature and availability of financial aid.

According to the attorneys general, 40 million Americans have an outstanding student loan, up from 29 million in 2008. Borrowers carry an average balance of $29,000 in student loan debt. Nationwide, student loan debt now stands at $1.2 trillion, representing an increase of more than 150 percent since 2005.

The U.S. Senate Health, education, Labor and Pensions Committee reported that, during the 2009 – 2010 school year, for-profit college took in $32 billion in taxpayer-backed student aid and spent nearly 25 percent of their revenue on marketing and recruiting – exceeding what was spent on student instruction.

Attorney General Jepsen thanked Massachusetts Attorney General Maura Healey for her leadership on this matter.

Assistant Attorney General Joseph Chambers is assisting the Attorney General with this matter.

Please click here to view the multistate letter.


Media Contact:
Robert S. Blanchard
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Twitter: @AGJepsen