Students From Troubled For-Profit Colleges Refuse To Pay Back Loans
AUDIE CORNISH, HOST:
A group of former college students made a big announcement this week, they're refusing to pay back loans they took out to attend the for-profit Corinthian Colleges. They call it a political protest. And today, representatives of the student group met with officials from the Consumer Financial Protection Bureau. The federal agency is itself suing Corinthian, alleging predatory lending practices. Anya Kamenetz of the NPR Ed team joins me now. She's been following this story. And Anya, give us a little background. How did this protest begin?
ANYA KAMENETZ, BYLINE: Well, it all dates back to last July. Corinthian Colleges, which is a chain of for-profit colleges with 70,000 students, ceased operations very suddenly. And that was in response to a crackdown from the Department of Education. Then in November, 50 of the campuses - the 85 campuses - were sold, and they weren't sold to an education company. They were sold to a loan financing company, a middleman in the student loan market. And this company, ECMC, had never operated colleges before. Then just over a month ago, the Consumer Financial Protection Bureau and the Department of Ed. announced that they were forgiving almost $500 million of these private student loans that were held by former Corinthian students.
CORNISH: But activists aren't satisfied, right? I mean, what more can you tell us about them and specifically, what do they want?
KAMENETZ: Right, so these Corinthian students were actually recruited, let's say, by a group that's calling itself the Debt Collective and they're coming out of the Occupy Wall Street movement, and they've been taking a series of actions to sort of raise awareness around the student debt problem. And last September, they made an announcement that they had bought-up some loans, some private student loans that had been made to Corinthian students originally. But when loans go bad, when they get, you know, past repayment, they're often put up for sale in the secondary market. They can be written-off and then they can be resold for pennies on the dollar. So in that action last fall, they erased $3.9 million in private student loans. But now they're shifting to this other tactic, which is getting actual Corinthian students to band together and say, we're just not going to pay these loans back.
CORNISH: Isn't that a risky move? I mean, aren't you kind of messing with your credit history there?
KAMENETZ: You know, it is a risky move. I talked to the organizers about this and they said, you know, we have been very careful to walk everybody through their financial situation, their credit score - said that they understand the risk that they're taking. And they say, you know, these so-called Corinthian 100, many of them are working mothers, single moms, they have already been having huge problems paying back their loans. They're already suffering the financial consequences of that. And what they're trying to do now is just shed a little more light on the problem to hopefully gain a little more publicity and a better outcome.
CORNISH: So, Anya, how is the government responding?
KAMENETZ: Well, it's significant that both the Consumer Finance Protection Bureau and the Department of Ed. agreed to meet with the strikers. And the Department of Ed. told me that they're taking a, quote, "series of actions to hold Corinthian accountable," but, they want borrowers to keep paying back their student loans in the meantime.
CORNISH: But Anya, aren't these federal loans that these students have? I mean, couldn't the Ed. Department do more?
KAMENETZ: That's exactly right. This money is owed to the Education Department, so in fact what the strikers are calling for is that the Department of Ed. write off these loads immediately, which is in their power to do so. But what you're seeing instead is that the Department of Education does seem to be taking steps to hold the overall sector - the for-profit college sector - accountable. In fact, today the Ed. Department released a list of more than 500 schools, 290 of which are for-profits, and it's keeping a close eye on them for financial reasons, which are exactly the same regulatory financial issues that sank Corinthian Colleges.
CORNISH: What should we make of this timing? I mean, you mentioned the Ed. Department releasing this list. This is coming right at this meeting with the Consumer Financial Protection Bureau. What's going on?
KAMENETZ: Well, I think in the big picture, you see that the for-profit college sector is having to answer very serious questions from all angles. You know, we heard a couple of weeks ago that the University of Phoenix, which was once the largest, most powerful higher education for-profit institution, has dropped by more than 50 percent in its enrollment. I think you've got these grassroots political actions. You've got regulatory actions, legal actions. For-profit colleges are having a really hard time right now.
CORNISH: Anya thanks so much for talking with us.
KAMENETZ: Thank you, Audie.
CORNISH: That's Anya Kamenetz of the NPR Ed team. Transcript provided by NPR, Copyright NPR.