Smart Borrower Blog

Student Loan Strike Gains Ground With Government

Apr 1st, 2015 @ 8:10 PM by Amber Nelson

A month after 15 former students formally refused to pay their federal loans, their “debt strike” has attracted 85 more people and the attention of the U.S. government.

The strikers are all current and former students of the Corinthian College network which includes Evertest Institute, Wyotech and Heald College. After a wave of accusations about its high rate of loan defaults, deceptive marketing practices, falsified data on graduation rates and questionable academic programs, Corinthian’s access to federal funds was retracted last year. As a result, many of its schools were sold or closed.

The striking students from Corinthian schools have joined up with Debt Collective, a branch of Occupy Wall Street, and are taking a bold stand in order to get their student loans forgiven by the government. They have filed a defense claim asking the Education Department to cancel their loans on the grounds that Corinthian broke the law with dubious practices and pressured them into the student debt.

While the government has forgiven $480 million in private student loans of former Corinthian pupils, it has not canceled any federal loans to date. The debt strike, however, has the made headway. The Consumer Financial Protection Bureau invited the strikers to Washington on Tuesday to discuss their concerns.

The CFPB, an independent government agency, has been active in working to reduce the Corinthian student private loans. The agency has asked a senior Education Department official to attend its meeting. The Department is the organization with the power to dismiss the federal loans.

“What these Corinthian students have experienced is troubling, and it is why we took a series of actions in recent months to hold Corinthian accountable and put the school on the road to closure,” said Denise Horn, a spokeswoman for the Department in an emailed statement. “We will review every claim [for loan forgiveness] and continue to investigate Corinthian to help students as much as possible.”

If the government does not decide to forgive the strikers’ federal loans, the former students could face grave financial consequences like having their paychecks docked, losing their tax refunds and having their Social Security benefits tapped by the government. On top of that, defaulting on federal student debt could ruin their credit, making even things like getting a job or buying a house very difficult.

The Department of Education is in a tricky position because forgiving the Corinthian student federal loans would set a new precedent that others might try to exploit and more and more former students may decide to refuse to pay their debts. Not a good situation for an agency that uses taxpayers dollars to fund student loans.


About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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