The widely publicized problems at for-profit Everest University — problems that led the U.S. government to force a sale of its campuses — came with a bit of good news for students on Tuesday:
Former students at Everest will receive partial loan forgiveness: 40 percent of the balance on their private “Genesis” loans will be wiped off the books. That should amount to thousands of dollars in savings for many former and current Everest students. Some of those loans are alleged to have carried extremely high interest rates.
“That’s great,” said former Everest student Kyle Hitt, who graduated from the school’s now-shuttered Kendall campus. “Forty percent is 40 percent.”
The total value of the loan forgiveness is estimated at $480 million. Everest currently has 10 Florida campuses, including one in Pompano Beach, and it previously operated campuses in Hialeah and Miami.
Everest’s parent company, Corinthian Colleges, also operates a campus of its WyoTech schools in the Daytona Beach area. WyoTech students, too, will get partial loan forgiveness.
Students don’t need to take any action to receive the loan forgiveness. Eligible students will be notified by their student loan servicer, which is the company that collects their student loan payments. The forgiveness only applies to Everest’s private Genesis loans, and not to federal loans such as Stafford loans.
Corinthian Colleges collapsed last year after widespread allegations that it inflated job placement numbers. Corinthian is accused of creating fake employers (and listing students as placed with those fake jobs), listing unemployed students as having jobs, and counting students as “employed” even if they worked only one day.
Hitt landed a job in his chosen field of surgical tech, but he said many of his classmates did not. And although Hitt liked his teachers at Everest, he said the financial aid staff seemed “kind of shady” from the start.
“They just seemed very hesitant to answer questions about money,” he said. “But yet when it was time to collect, they would pull me out of class to make sure that I got my payment in.”
Corinthian’s suspicious job placement numbers led the U.S. Department of Education in June to order the company to sell its campuses. The federal government on Tuesday approved ECMC Group as the new owner of more than 50 U.S. campuses that used to be operated by Corinthian.
But for the sale to go through, the feds required the partial student loan forgiveness, along with some additional conditions. Corinthian still faces a pending lawsuit by the federal Consumer Financial Protection Bureau, which accuses Corinthian of not only lying about job placements, but also of charging unusually high interest rates on its private Genesis loans. Those loans charged interest rates as high as 14.9 percent, and tacked on an origination fee of 6 percent, the CFPB’s lawsuit states.
More than 60 percent of students receiving Genesis loans eventually defaulted on them, according to the CFPB.
In a statement regarding Tuesday’s loan forgiveness, CFPB Director Richard Cordray said “today’s action will provide substantial relief to current and past students who were harmed by Corinthian’s predatory lending scheme.”
Stan Mortensen, Corinthian executive vice president and general counsel, shot back: “We take very strong exception to today’s unfounded and unproven charges by the Consumer Financial Protection Bureau and will continue to contest them in court.”
Consumer advocates welcomed the news of loan forgiveness for students, but there is still skepticism about Everest’s new owner, the Minnesota-based ECMC Group. The company is a not-for-profit student debt collection company — with no prior experience operating schools — and it has been criticized in the past for aggressive collection tactics.
David Halperin, a Washington-based attorney who has written about the Corinthian sale, noted that ECMC insisted that its new students be prohibited from filing class-action lawsuits — and federal regulators signed off on that. Halperin said there are “some very troubling provisions” in the sale agreement.
Still, he said, “the CFPB and the Department of Education deserve some credit because they did secure some important debt relief that will benefit a lot of Corinthian students.”