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Dept. of Education Announces “Special Master” on Corinthian Colleges Loans

June 29th, 2015

On Thursday, June 25th, the U.S. Department of Education (ED) announced that consumer advocate Joseph A. Smith will serve as the Department’s “special master” on loan discharges for former Corinthian Colleges students, as well as advise the Department in developing a broader system to aid students at other institutions who seek debt relief because they believe they were defrauded. The appointment of a special master was one of the steps included in the Department’s plan announced on June 8 to provide debt relief to Corinthian students. Mr. Smith recently served as a monitor of the National Mortgage Settlement and also was appointed to monitor the consumer relief aspect of the federal government’s settlement with JPMorgan Chase. Previously, he served as Commissioner of Banks in North Carolina for almost 10 years.

In a recent tweet , ED said Mr. Smith was appointed “to guide a fair, efficient process.” In this position, he will lead the Department’s efforts to hear out and reimburse those students but will not personally rule on whether the claims are viable. He expects to issue a report at the end of the summer, which will summarize his initial findings and advice to the Department. Mr. Smith will report to Under Secretary Ted Mitchell and advise on the following areas:

  • Creating a simple application for debt relief for all borrowers applying for loan forgiveness.
  • Making recommendations on issues of law and fact related to borrower defense claims received by the Department.
  • Strengthening the process by which the Department can recover money from schools after successful borrower defense claims.

On a press call yesterday, Under Secretary Mitchell reiterated that the Department intends to ensure that students receive every penny of relief to which they are entitled. Mr. Mitchell also stated that as of June 23, the Department had received 4,500 applications for closed school discharge, 1,400 requests for borrower defense discharge, 850 requests for forbearance or suspension of collection while claims are being processed, 180 requests for discharge stemming from attendance at Heald College, and 100 other borrower defense applications. In a blog post, Mr. Smith said: “I believe that working with all the stakeholders in this very important issue, the Department of course, students, people who represent them, state attorneys general and others, we can craft a fair efficient means of giving redress to people who have been wronged. I’m very excited about this opportunity and look forward to working with the Department and others to a good end for all Americans.” Interestingly, he did not include schools in the list of stakeholders. He said the closed school discharges could be cleared up quickly, but more time would be required on the other issues.

To read the Department’s press release on the appointment, click here. The press release includes a link to the recorded press call.

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