Corinthian College on the Hook for $530 Million in Student Loans

NEW YORK  

A federal judge came down on Corinthian College Wednesday, ruling that the shuttered for-profit school is liable for $531 million in student loans.

The school misled students about their future job prospects, and lured thousands to take out high-interest, private loans in order to enroll in one of its programs, according to the lawsuit brought by the Consumer Financial Protection Bureau over a year ago.

The school itself served as the debt collector for these loans, and was found to have strong-armed students to pay them back, sometimes pulling them out of class or denying them computer access if they hadnt paid up.

Although the company was found liable, it wont be able to cover the $531 million since it entered bankruptcy earlier this year, the CFPB said. Its unclear whether the 115,111 former students with these private loans will still be left footing the bill. For now, they can file a complaint with the CFPB.

We all have much more work to do before current and past students who were hurt by Corinthians illegal practices can be made whole, said CFPB Director Richard Cordray in a statement.

Corinthians private loans came with interest rates as high as 15 percent in 2011. At the same time, a student could get a federal student loan with an interest rate between 3 percent and 7 percent. More than 60 percent of Corinthian students defaulted on these loans within three years, according to the CFPB.

Some of Corinthians former students have been refusing to pay back their loans ever since the school closed its doors and filed for bankruptcy in May and many may see their loans forgiven.

The Department of Education has set up a fast-track process for those with federal loans. Those who were enrolled when their school closed can apply to have their loans wiped away. And if they had already completed the program, they can still apply for forgiveness if they believe they were victims of fraud. Since 2010, close to 350,000 students took out federal loans in order to attend a Corinthian College, totaling about $3.5 billion.

Those with private loans administered by Corinthian have already been promised a 40 percent reduction in their loan balance, thanks to an agreement between the government and a company that acquired some of Corinthians campuses. The company is paying off a total of $480 million of the students outstanding debt.

This isnt the first win for the federal government in its crackdown on Corinthian College. The Department of Education fined the school $30 million in April after it found that it was overstating job placement rates for graduates. The school is also facing lawsuits from several state attorneys general.

Founded in 1995, Corinthians network of for-profit schools once included 100 campuses across the country, where about 74,000 students were enrolled. The schools operated under different names, including Everest, WyoTech and Heald.


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The Dangers of Using Bonds as Collateral for Loans

Buying bonds has long been considered a safe investment tool. A look at China’s fluctuating market is a prime example of when using Bonds as collateral for loans is a dangerous practice. Many investors in the Chinese market are borrowing money using Bonds as collateral, but this is causing an adverse side effect.


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Commissioners approve loans to help suburbs build

Franklin County Commissioners approved three loans totaling $1.7 million on Tuesday for suburbs
to complete infrastructure projects intended to boost economic development.

Infrastructure upgrades in Upper Arlington, Marble Cliff and Whitehall will start soon with
those funds, which are the first to be distributed through a revolving loan program the county
established using some of the money from a sales tax increase in 2013.

“Those sales tax dollars aren’t just disappearing into thin air,” said James Schimmer, the
county’s economic development and planning director. “They’re being made to work to generate more
dollars for economic development.”

Under the loans approved Tuesday, Upper Arlington will receive $1 million to install more fiber
optic cable, Marble Cliff will receive $125,000 for a new water line, and Whitehall will receive
$550,000 for construction on Hamilton Road. The loans carry a 1.7 percent interest rate and must be
repaid over 10 years.

All three projects also are receiving state money.

When commissioners agreed to raise the sales tax in 2013 to help pay for a new jail and morgue,
they said some of the money would be set aside for economic development projects. Since then, they
have announced plans for the infrastructure bank, workforce development grants and green-energy
projects.

The county is earmarking about $3.5 million a year over four to five years for the revolving
loan fund. Officials have said the fund should become self-sustaining eventually as municipalities
that receive loans start to pay them back.

Upper Arlington’s loan will pay for part of a $2.6 million plan to install more fiber optic
cable that officials believe could help projects related to health and information science, such as
the a new Ohio State University Medical Center office in the city.

Whitehall will spend about $2.8 million for an overhaul of North Hamilton Road that includes
better access to a business park near the airport.

“It’s a large gateway into our city,” said Joe Ryan, economic development specialist in
Whitehall. “It’s a very important commercial area.”

Marble Cliff plans to install an 8-inch water line on Dublin Road and a 6-inch water line on
Cardigan Avenue as part of a plan to redevelop a commercial and industrial park on Cardigan.

“All in all, this will put us in a very positive position,” Marble Cliff Mayor Kent
Studebaker.

If the village had to pay for the $450,000 project on its own, Studebaker said it would
represent about a quarter of its operating budget.

The county already has started to accept applications for the next round of funding through the
infrastructure bank. The deadline to apply is Friday.

“We are limiting our lending to municipalities within Franklin County, but it has to be linked
to economic development,” said Alex Beres, the county’s economic development program
coordinator.