As we’ve discussed in earlier posts on Adam Law Group’s bankruptcy blog, Everest student loans are one of the major sources of debt for many Americans and under current law, it is very difficult, though not impossible, to discharge them during bankruptcy.
Yet, there is reason to be more optimistic. The public and legislatures have begun to recognize the overwhelming student loan crisis and to propose solutions. A house bill has been proposed that would make it easier to discharge student loan debt during bankruptcy and a number of Senators joined forces last year to encourage the Department of Education to provide additional guidance regarding defenses against enforcement of student loans and to specifically advocate for the discharge of student loan debt for students that used it to fund their education at a Corinthian Colleges, Inc. (CCI) institution.
Students of the troubled CCI chain of institutions Everest, Heald, and WyoTech, have faced uncertainty regarding their education and corresponding student loans over the past year as government investigations led to CCI’s agreement to sell many of its institutions and close the rest. This week the sale to Zenith Education Group, a newly formed subsidiary of ECMC Group, was finalized and approved by the federal government after ECMC agreed to forgive $480 million in loans.
It’s a great press release but what exactly does it mean for CCI students? It’s a positive, but not perfect outcome. The Everest student loans being forgiven are the ones that arose out of a private lending program, the Genesis program, created by CCI. The program allegedly encouraged students to take out high-cost private loans, whose interest rates rivaled credit cards, on top of their federal loans in part by intentionally inflating tuition beyond that which could be covered by lower interest federal loans and then when they inevitably defaulted, debt collectors pursued students relentlessly.
Those current and former students that do have private Everest student loans through the CCI program will have their balances reduced by 40%, immediately and negative information related to the loans removed from their credit reports. Additionally, all current students will see a 20% tuition reduction which should reduce the need for future loans. ECMC has also agreed not to offer private student loans for at least seven years, which should help prevent future students from falling into the same traps.
Unfortunately, current and former students will still bear the burden of the remaining 60% of the Genesis loans they took out as well as the federal Everest Student loans they took out which are unaffected by the deal. On the federal loan front, it remains to be seen whether the demand by Elizabeth Warren and other Senators that the Department of Education discharge CCI related student loans, elicits the desired outcome.
If you’re saddled with Everest student loans, or other debt, contact the Jacksonville student loan lawyers at Adam Law Group today to discuss your options and whether bankruptcy might be an effective tool to get you back on your feet with the fresh start you need.