Magazine article American Banker

Buyer of For-Profit Schools to Forgive Student Debt, CFPB Says

Magazine article American Banker

Buyer of For-Profit Schools to Forgive Student Debt, CFPB Says

Article excerpt

Byline: Joe Adler

WASHINGTON -- The acquirer of a for-profit college chain sued by the Consumer Financial Protection Bureau will forgive over $480 million in student debt under a deal announced Tuesday.

The CFPB alleged in September that Corinthian Colleges had made false claims to attract student loan borrowers and used aggressive collection tactics. The chain had already been forced to close a dozen schools by the Department of Education, which suspended its access to federal aid. Among the consumer bureau's claims were that Corinthian falsely promised job placement to borrowers, and that students with outstanding debt were pulled out of class.

As part of its acquisition of over 50 campuses run by the company, ECMC Group agreed to provide the debt relief to current and past students who were affected by Corinthian's "Genesis loans" program, the CFPB announced along with the Department of Education. The buyer -- a nonprofit that services federal student loans -- will wait seven years before offering its own private student loans and will halt lawsuits against borrowers with outstanding Corinthian loans. (Closure of the acquisition was announced Tuesday.)

"These consumers were lured into high-cost loans destined to default, and then targeted with aggressive debt collection tactics," CFPB Director Richard Cordray said in a press release. "We will be vigilant to ensure that consumers receive this important relief and that others are protected in the for-profit college industry."

ECMC Group plans to convert the acquired Corinthian campuses -- which operate as WyoTech and Everest -- into nonprofit status. The schools will be managed by Zenith Education Group, a newly formed subsidiary that provides career school training.

The acquirer had asked the CFPB for a release from Corinthian's legal liability, which the bureau said it would grant only if ECMC took steps to provide loan relief. …

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