Students Skipping Loan Payments Aren't Deadbeats—They're Giving College an F

Former attendees of for-profit Corinthian Colleges Inc. have launched the first debt strike in U.S. history.

(Photo: Strike Debt/Facebook)

Mar 18, 2015· 3 MIN READ
A veteran journalist and former White House correspondent for Politico, Joseph Williams is a freelance writer, blogger, and essayist in Washington, D.C.

Like civil rights protesters marching against an entire police force, an ongoing David-versus-Goliath confrontation between a small group of protesters and the U.S. Department of Education has the potential to inspire a movement and prompt change. But the students, victims of fraud at a now-defunct for-profit college, have an unorthodox rock in their slingshot: a debt strike.

The members of the group, known as the Corinthian 15, are refusing to repay student loans they borrowed from the government to pay for classes at Corinthian College—a nationwide, 100,000-student career-college behemoth that had been valued at more than $1 billion a few years ago but went bust last year amid financial mismanagement and a flurry of lawsuits.

They say Corinthian strong-armed them into taking the loans, swindled them out of classes and books, and lied about job placement—all while the Department of Education looked the other way and ignored blatant fraud. Now, the students argue, the government is forcing them to pay for an education they never received and jobs they never got.

Despite a recruiter guaranteeing she wouldn't have to make her loan payments until after graduation, “Two months into my program, I received my first loan bill. That’s when I learned that I was expected to pay the interest on my private loan debt while in school,” Mallory Heine, a former student in the Corinthian system and a member of the Corinthian 15, wrote in a Washington Post essay published this week. “Soon I was selling my plasma twice a week to buy groceries and make my interest-only payments” on a tuition that ultimately reached $24,000.

Heine and her comrades have a lot at stake: If they’re successful, the group has the potential to inspire hundreds of thousands of students ensnared in career-college debt; if they fail, they’ll stay on the hook for the loans, with ruined credit scores, even dimmer prospects of finding a job, and the potential that their wages could be garnished to pay the debt.

The debt strike puts Secretary of Education Arne Duncan in an uncomfortable position too.

If he cracks down on the Corinthian 15 and forces them to repay the loans, it would confirm critics’ allegations that the department is willing to sacrifice students on the altar of the multibillion-dollar career-college industry. If he forgives their loans, it would set a precedent that could cost the government hundreds of millions of dollars in loan forgiveness from other students who fell prey to other, equally shoddy schools.

In a deal with the federal government last fall, Corinthian agreed to a structured shutdown, leaving some of its 107 nationwide campuses open just long enough for students to finish classes. In exchange, the Department of Education agreed to unfreeze some of the millions in federal student-loan money the school had been scheduled to receive to pay its operating expenses.

But students didn’t know the department was working with Corinthian to find a buyer: ECMC, an agency that has a department contract to collect on defaulted federal student loans. At the same time, Corinthian faced a blizzard of lawsuits, and investigators uncovered violations that read like a laundry list of shady industry practices: teachers who couldn't or didn't teach, little or no job-placement assistance, a financial aid department that steered students into predatory loans.

“Classes consisted mostly of teachers reading aloud from books,” Heinie, who had enrolled in the school's nursing program, wrote in her Post essay. “After I earned my degree, I did not have the knowledge I needed to pass the state licensing exam. I eventually passed it by spending hours researching the test questions online and watching YouTube videos.”

Barmak Nassirian, a policy analyst at the American Association of State Colleges and Universities, says Heine’s experience is the exception, not the rule—“a sad state of affairs.”

He’s not surprised students are “risking it all” to demonstrate how poorly Corinthian treated them—and to protest the Department of Education’s “inept gatekeeping.” The government, he says, should have protected the students from a corrupt system “that uses consumer fraud as a business model.”

Unfortunately, says Nassirian, the problems the Corinthian 15 have brought to light "typified the industry.... Occasionally the really stupid ones get caught. But overall, running a [for-profit college] is a license to steal.” And there’s no sign that license will get revoked, despite tough talk from the Obama administration.

Although he believes their debt should be forgiven, Nassirian says it’s hard to predict how the Corinthian 15’s debt strike will end. The good news is the students have picked up a powerful ally: Rep. Maxine Waters, a California Democrat and ranking member of the House Financial Services Committee. Ultimately, though, he says, the Department of Education must reform how it deals with student debt, and this case is a good place to start.

“I wish them well,” Nassirian says. “They’ve exposed themselves to some significant risks. I wish I could say [Corinthian] is an outlier," he adds, but “they are just the tip of the iceberg.”