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The Consumer Financial Protection Bureau (CFPB) and 13 state attorneys general have reached a settlement in a case that alleges private student lender Aequitas Capital Management conducted a predatory lending scheme, CNN reported.
Aequitas funded loans to former Corinthian College students, with the knowledge that they were likely to default, the government claims. Former Corinthian students will receive $183 million once the settlement is approved by the US District Court in Oregon.
“Tens of thousands of Corinthian students were harmed by the predatory lending scheme funded by Aequitas, turning dreams of higher education into a nightmare,” CFPB Director Richard Cordray told CNN.
Corinthian Colleges Inc. was one of the largest for-profit college companies in the US prior to 2014, but numerous investigations and lawsuits alleging wrongdoing against the company rapidly decreased its size. Corinthian was fined $30 million by the Department of Education (ED) in 2015, which led to its eventual demise.
The ED provided a full discharge of federal loans to students who attended Corinthian anytime from June 20, 2014 on. But students who had taken out loans from private lenders did not qualify for discharges. Now, borrowers who were enrolled when Corinthian closed may have an opportunity to have their loans discharged. All other former students may be eligible for a reduction of up to 55% of their debt.
Attorney General Eric Schneiderman estimates that the average borrower will receive about $7,000 in relief.