ELISSA NADWORNY, HOST:
The U.S. Department of Education announced this week that it will forgive billions in federal student loans for those who attended college campuses owned by the now defunct for profit Corinthian Colleges. According to the department, the $5.8 billion in loan forgiveness is the single largest discharge in its history. The decision will impact more than half a million students who attended Corinthian-owned schools such as Everest Institute, WyoTech and Heald College. Corinthian closed its doors in 2015 after the Education Department found it misled students about job placement rates and the ability to transfer credits. Since then, former Corinthian students have been searching for closure of their own by campaigning the federal government to cancel their student loans.
We wanted to know more about how former students are experiencing this moment, so we called one of those former students. Ann Bowers attended Everest College, and she joins us now. Ann, welcome.
ANN BOWERS: Thank you, Elissa.
NADWORNY: And to help us understand the Biden administration's broader approach to loan forgiveness, we called Josh Mitchell. He reports on the economy for The Wall Street Journal. Welcome, Josh.
JOSH MITCHELL: Yes, thank you.
NADWORNY: So, Josh, I want to start with you. Can you give us a brief overview of how the Department of Education came to this decision?
MITCHELL: In the early 2010s, a bunch of states and the federal Education Department started investigating this big for-profit chain, Corinthian Colleges. This was a huge for-profit chain that offered online courses, as well as courses around the country in brick-and-mortar campuses, you know, for two-year programs in business, accounting, health care, what have you. And they started to get complaints from former students about job placement rates. These colleges were telling students things like, if you come to this campus, we place 92% of our students into jobs once they leave.
So they were giving students this impression that if you enrolled and paid thousands of dollars in tuition, you were almost guaranteed a very good job when you left the school. And it turned out that a lot of these students were coming out of these programs and were not finding jobs. So, for example, at some of these campuses, they would say 92% job placement rate. But one state attorneys general and the Education Department started looking into their books. They actually discovered some of these job placement rates were actually 12%.
And so a lot of students were essentially being misled according to these investigations. And so for years, there have been many people around the country and many poor people who enrolled on these campuses who simply couldn't pay off their loans. And they were arguing that they had been deceived by the recruiters of these schools. And so the - now the Biden administration has now said we are going to use the Higher Education Act to basically cancel their loans. They are entitled to not have to pay back their debt because they took out the debt under false circumstances.
NADWORNY: So, Ann Bowers, I want to know how you are experiencing all this as it was happening. So Josh has kind of given us the background. Tell us your story.
BOWERS: With me, I didn't know that all of this was happening. I was too busy with my studies, of course, you know, just trying to do my best because I was disabled and trying to get off of disability and be able to start my own business in marketing. Well, I got a call or text from a fellow student and asked me if I had heard what was going on with the school, and I had no clue. And so he says, well, Google it. I did. And I said, oh, my God. The reaction I had was just horrifying. And I'm like, OK, what do I do now? I'm halfway through my bachelor's.
And I started looking for other schools to attend, possibly transfer to, you know, and found out that Corinthian had taken all of my money. They had me set up for their private loans. That was their next step with me, as they did to many, many students. We were trying to figure out, what will we do next? Where do we go? You know, what do we do about this? We got all this debt, and we don't have our degrees. And the degrees we do have are worthless because this school committed fraud. No one's going to want to hire their students. So our only choice was we decided we're going on strike. We're not paying. We can't pay it.
NADWORNY: Well, Josh, I want to switch gears to this week's announcement by the Education Department. Can you explain what this action does, like, what sets it apart?
MITCHELL: So the Education Department is using this law called defense to repayment. And advocates had discovered this long dormant law. And it's pretty vague. It basically says, if you can prove that you were defrauded by your school, you are entitled to have your loans canceled by the Education Department. But the question was for years, how do you prove that? What qualifies as proof? And so the Obama administration and then the Trump administration tried to craft rules that basically set a process up for borrowers to come to the department and say, I was defrauded, here is my proof, please cancel my loans. And hundreds of thousands of people have done that. But there's been this huge backlog because this is just a huge bureaucratic process to have to go through.
And so essentially this week, the Biden administration said instead of having individual borrowers, hundreds of thousands of people come to the department and have, you know, employees look through each application, they just said we're just going to cancel this in one fell swoop. The interesting thing is is that it's not just Corinthian that had these issues. There's a lot of other former students at colleges across the country at other for-profit colleges that have essentially said the same thing. And they're still asking to get their loans canceled. And so the Biden administration, while it took this big action, they're also drafting rules going forward to try to clarify what when students can get their loans canceled, and whether future classes, you know, future groups, not just individuals, can also have their loans canceled.
NADWORNY: Ann, I wonder if you could talk a little bit about - you received loan forgiveness in 2018, but many of your peers did not. Have you spoken about them - about what this will mean for them now?
BOWERS: Oh, they're related. We are ecstatic that this happened. It's giving other students hope. And it's changing a lot of lives because that debt hanging over their head was preventing them from living their lives and, you know, supporting their families and - or buying a house.
NADWORNY: Josh, I want to ask you about the midterm election year. Right? Much of the talk among Democrats is about widespread loan forgiveness across all universities and colleges. There are reports that the Biden administration is considering the plan to forgive $10,000 in loans for all borrowers. People in his own party are saying that's not enough. What does this week's announcement about Corinthian Colleges clue us in to what the administration is thinking down the road?
MITCHELL: The administration has always taken a more moderate approach within the Democratic Party about canceling student debt. And Elizabeth Warren, for example, during her presidential campaign calling for $50,000 across the board. You had Bernie Sanders who wanted to be even more aggressive in canceling student debt. So the Biden administration and President Biden have tried - have sought a more moderate approach, which is to say, let's do $10,000 across the board if Congress will do it. They're now looking at potentially doing that through an executive action. There is reporting that maybe they're not going to do 10,000 for everyone, but they'll do it for people under a certain income threshold. But the broader administration approach is to basically try to, you know, cancel debt for people who are the most disadvantaged, you know, for groups that genuinely, you know, truly have been harmed by their schools, who have been deceived by their schools. And so that's been the broader administration approach. And I think that this is an example of that.
NADWORNY: That was Josh Mitchell. He's an economy reporter at The Wall Street Journal. We also heard from Ann Bowers. She is a former Everest College student. Thank you both so much for being with me.
MITCHELL: Sure. Thank you.
BOWERS: Thank you, Elissa. Transcript provided by NPR, Copyright NPR.