CFPB Pursues Recovery Against For-Profit College Corinthian and Relief for Its Students

by McGuireWoods LLP

Law-books-iStock_000002891011Large1Corinthian Colleges (Corinthian) announced on April 26 that it would cease operations at its remaining physical campuses. This announcement refers to the 30 or so physical campuses that Corinthian continued to operate subsequent to the sale of more than 50 of its campuses to ECMC Group last fall. The campuses sold to ECMC Group are not impacted by the closure. Prior to the sale, Corinthian had more than 100 campuses across the country, operating under the names Heald, Everest and WyoTech. These schools enrolled 72,000 students who received $1.4 billion in federal financial aid annually.

The closure comes less than two weeks after the U.S. Department of Education announced it would fine the school $30 million after the agency determined Corinthian misled students about job placement opportunities and loan repayment rates. This was just one of several setbacks for Corinthian. The Consumer Financial Protection Bureau (CFPB) also brought an action against Corinthian in U.S. District Court for the Northern District of Illinois (Case No. 14-7194). That litigation is ongoing, with an answer from Corinthian due May 20, and the allegations raise the same issues addressed by the U.S. Department of Education:

  1. Corinthian misrepresented job placement data to prospective students to induce enrollment.
  2. Corinthian encouraged students to take out private loans to supplement federal aid because federal law requires that no more than 90 percent of an institution’s revenue come from federal financial aid provided under Title IV of the Higher Education Act of 1965, and students could not afford the uncovered portion of their tuition.
  3. Corinthian expected that many students would default on both types of loans.
  4. After attending a Corinthian college, many students could not find employment in their chosen field.
  5. Consequently, many Corinthian students did in fact default on their student loans.

The CFPB also has begun to provide relief for Corinthian’s students. On May 6, the CFPB published guidance for students enrolled at the recently closed campuses. For students on federal aid, the CFPB advised they discharge loans by applying for a closed school discharge. For students with private loans, the CFPB encouraged students to contact their loan servicers to see what they would allow and to submit a complaint online if necessary.

The CFPB also held a field hearing in Milwaukee on student debt on Thursday, May 14. CFPB Director Richard Cordray spoke, and the hearing featured testimony from consumer groups, industry representatives, and members of the public. The CFPB indicated it would be taking a closer look at various practices associated with student loan servicing, as other regulators and analysts have grown increasingly concerned about the vast amount of non-dischargeable debt in the economy. Private and federal student loan debt totals more than $1.2 trillion, and the loans often are not serviced by lenders but by separate servicing companies that process monthly payments, assist with modified repayment options, and perform other tasks.

At that May 14 field hearing, the CFPB unveiled its newest Request for Information (RFI). In the RFI, the CFPB provided an overview of the student loan market and problems experienced by consumers when repaying student debt before identifying a series of questions related to student loan servicing for which the CFPB seeks input. The specific issues for which the CFPB is seeking input include the following:

  • Common industry practices that impact student loan repayment
  • The applicability of consumer protections from other consumer financial product markets (including protections for consumers with mortgages and credit cards)
  • The impact of limited availability of data about student loan servicing and student loan repayment on borrowers

According to the CFPB, it will be working with the Department of Education and the Department of the Treasury to identify initiatives that strengthen student loan servicing. Feedback received in response to the RFI will assist market participants and policymakers in developing options to improve borrower service, reduce defaults, establish best practices, assess consumer protections, and spur innovation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McGuireWoods LLP | Attorney Advertising

Written by:

McGuireWoods LLP

McGuireWoods LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.