The Government Has 1.2 Billion Reasons To Keep Corinthian Colleges Afloat – Consumerist

For the last week, we’ve been telling you about the ongoing negotiations between the U.S. Dept. of Education and Corinthian Colleges, the operators of the for-profit Everest University, WyoTech, and Heald College chains, that would sell off some of the schools and wind-down the others. Some people have asked why the government doesn’t just let Corinthian collapse. Part of the reason is that it would leave some 72,000 students in the lurch, but a big motivating factor is that the government could end waving bye-bye to more than $1 billion in student loan debt.

What a lot people don’t know — because it doesn’t happen very often — is that one of the few ways the government will discharge 100% of someone’s student loan debt is if their school completely shuts down and the student doesn’t continue her education elsewhere.

And it’s not just currently enrolled students that could get out of their loan obligation. If you withdraw from a school and it closes within 120 days, you may also qualify for a discharge. Additionally, those who are on an official leave of absence from the school when it closes may have a way out of their federal student loans.

Note that we’re only talking about federal Direct Loans, Federal Family Education Loan (FFEL) Program loans (which include Stafford and PLUS loans), or Perkins Loans.

Corinthian students take out some $1.2 billion a year in these federal loans. It’s impossible to predict how many of the current students would choose to continue their education elsewhere and how many would opt just to say “Thanks for the discharge” and move on with their lives without finishing school.

Even those students who want to continue on elsewhere could face some bureaucratic hurdles if Corinthian simply ceases to operate.

“The school’s failure would unnecessarily harm students because they would have no access to academic records, assistance with transition or transfer, or any other services that a school in teach-out can provide,” the company wrote in a recent court filing.

The Government Has 1.2 Billion Reasons To Keep Corinthian Colleges Afloat – Consumerist