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SACRAMENTO August 18, 2017 – California Attorney General Xavier Becerra today announced a tentative settlement that provides over $51 million in debt relief for Californians who attended Corinthian Colleges. Corinthian intentionally targeted low-income, vulnerable individuals through deceptive and false advertising that misrepresented job placement rates and school programs. These unlawful activities were enabled by Aequitas Capital Management Inc., a private equity firm currently under U.S. Securities and Exchange Commission-imposed receivership.
Federal student loans made up almost 90 percent of Corinthian’s revenue. To maintain this revenue, Corinthian needed its mostly low-income students to receive these loans. Federal rules require for-profit colleges receive at least 10 percent of their revenue from sources other than federal student aid. To help fill this gap, Aequitas and Corinthian created a financial arrangement whereby Aequitas provided private loans to Corinthian students, and Corinthian guaranteed Aequitas a profit and agreed to buy back all non-performing loans.
The result was many Corinthian students were unable to pay back their federal student loans and private loans, as the education provided by Corinthian did not lead to good-paying jobs. Ultimately, the students defaulted and the American taxpayer was left holding the bag to pay off the federal student loans.
The California Attorney General’s Office led the charge against Corinthian, ultimately obtaining a $1.1 billion judgment in California state court. Now, Attorney General Becerra is holding Aequitas accountable for aiding and abetting Corinthian’s misconduct. Joined by 12 attorneys general and the Consumer Financial Protection Bureau, the settlement reached with Aequitas will in total provide $192 million for former Corinthian students across the country. California was a principal lead in settlement negotiations on behalf of the participating states.
“Thousands of students who attended Corinthian Colleges have been waiting too long for this debt relief,” said Attorney General Becerra. “However, our work is not over – there are still Corinthian students who have not obtained the debt relief they deserve. As Attorney General of California, I will continue to seek justice for Corinthian students and hold for-profit colleges accountable. I’m prepared to take any and all action necessary to ensure that all who seek higher education can do so without worrying that their American Dream will be stolen by a so-called educational institution.”
Attorney General Becerra is committed to seeking justice for Corinthian Colleges students. Since taking office, he has announced an outreach program encouraging thousands of affected California residents to apply for federal loan cancellation and urged the U.S. Department of Education to expedite federal loan forgiveness for Corinthian Colleges students. In addition, Attorney General Becerra has challenged the U.S. Department of Education for unlawfully delaying the implementation of regulations aimed at protecting students from decepti ve practices and fraud.