The CFPB Thursday sued Corinthian Colleges, Inc., a for-profit educational institution based in Santa Ana, Calif., for alleged predatory lending tactics.
The Bureau's suit alleges that Corinthian and its subsidiary schools lured tens of thousands of students to take out high-interest private student loans to cover expensive tuitions costs by advertising false job prospects and career services. The suit further alleges that the school used illegal collection tactics to strong-arm students into paying back the loans while still in school. The aggregate debt under the program is estimated at more than $500 million.
The suit covers loans made for the period of July 21, 2011 to the present, including those that have been paid off. Despite the natures of the complaint, no financial institutions are named as defendants or even mentioned in the text of CFPB's complaint.
“For too many students, Corinthian has turned the American dream of higher education into an ongoing nightmare of debt and despair,” CFPB Director Richard Corday said. “We want to put an end to these predatory practices and get relief for the students who are bearing the weight of more than half a billion dollars in Corinthian's private student loans.”
Corinthian − which operates schools under the names Heald, Everest and WyoTech − is one of the largest for-profit, post-secondary education companies in the United States. Corinthian and its subsidiaries have more than 100 campuses nationwide that currently serve about 74,000 students.
Tuition and fees for some Corinthian programs were more than five times the cost of similar programs at public colleges, according to the suit. In 2013, the Corinthian tuition and fees for an associate's degree was $33,000 to $43,000. The tuition and fees for a bachelor's degree at Corinthian cost $60,000 to $75,000. The average private loan interest rate was 15%, with an origination fee of 6%.
By comparison, 57% of Corinthian students come from households with average annual earnings of $19,000, according to the suit. Many students are the first members of their families to seek a post-secondary education.
Corinthian is already involved in lawsuits with other similar allegations. It is working with the U.S. Department of Education to scale back its operations, closing some campuses and trying to sell others. Veteran Affairs agencies in multiple states have suspended the use of GI Bill benefits for new students at Corinthian schools.
Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.
Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking credit union news and analysis, on-site and via our newsletters and custom alerts
- Weekly Shared Accounts podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the commercial real estate and financial advisory markets on our other ALM sites, GlobeSt.com and ThinkAdvisor.com
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
