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Debt Relief for Corinthian’s Former Students

Posted By:  |  September 2, 2015  |  0 Comment(s)

Since the recent bankruptcy of Corinthian Colleges early in 2015, many former students have been on a mission to have their student debt forgiven, but the outcome may come with a price – a steep tax bill.


In late spring Corinthian Colleges, also known as Everest, WyoTech, and Heald colleges, filed for Chapter 11 bankruptcy after being fined $30 million by the Department of Education for allegedly overstating job placement rates. The institution used this dubious marketing tactic to lure in students hopeful of attaining degrees for advancement in their career efforts.

The DOE said students who believe they were victims of these establishments may apply for loan forgiveness as long as any credits earned were not transferred to another school. Since 2010 approximately 350,000 students attended, taking out federal loans totaling close to $3.5 billion.

A staggering 16,000 students were still enrolled when they closed the doors to their last operating campuses and many of those students learned of the news only after attending classes on April 27.

Many of Corinthian’s students were also encouraged to take out high-cost private loans for these schools and may now also be eligible for debt relief to the tune of $480 million paid to wipe out at least a portion of these loans by the ECMC Group, the company which acquired 56 of these campuses in 2014.

A California bill, introduced by Senator Janet Nguyen, proposed protection to students who have to pay income tax on their loan forgiveness. The bill passed the state Senate Tuesday and is awaiting approval from the Assembly before the end of the legislative session on September 11.

For students to receive the debt relief U.S. congressional action must take place. Otherwise former students will likely have to cough up federal taxes on loan forgiveness in addition to state taxes should they live outside California.


  • How important is it to you for a debt consolidation company to offer financial education resources?
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