HARRISBURG —Attorney General Josh Shapiro today announced a proposed settlement with Aequitas Capital Management, a defunct investment firm, that provides $6.7 million in debt relief for 1,200 Pennsylvanians who attended for-profit colleges.
The proposed settlement, which is subject to approval by an Oregon federal court overseeing Aequitas’ receivership, is part of a broader settlement worth $192 million in debt relief for former Corinthian College students across the country. Once approved by the Oregon court, the settlement agreement will be filed in Pennsylvania by the Office of Attorney General’s Bureau of Consumer Protection.
Aequitas holds student loan accounts related to the now-defunct Corinthian Colleges, a large for-profit chain of 30 schools that filed for bankruptcy in 2015. In Pennsylvania, Corinthian operated the Everest Institutes in Bensalem, Bucks County and Pittsburgh and WyoTech, later bought by an unrelated entity, in Blairsville, Indiana County.
“Aequitas and Corinthian Colleges engaged in predatory practices that preyed upon students trying to better themselves through education,” Attorney General Shapiro said. “This proposed settlement will provide badly-needed debt relief for 1,200 Pennsylvania students. I will continue to protect Pennsylvania college students and their families by holding these for-profit institutions and lenders accountable for their deceptive practices.”
Once the court has approved the settlement, students in Pennsylvania with these loans from the Corinthian Colleges will receive notice their debt has been forgiven.
The original investigation into the deceptive loans and dealings between Aequitas and Corinthian was conducted by the Consumer Financial Protection Bureau. The probe revealed the private student loan program funded by Aequitas and offered to Corinthian students was a façade to comply with federal rules meant to ensure for-profit schools don’t receive more than 90 percent of their revenues from U.S. Department of Education loan and grant programs.
According to the investigation, Corinthian students were never told the portion of their tuition funded by the Aequitas-financed loans was a sham to gain access to federal funds and that the loans had historically high default rates. In addition, Corinthian Colleges induced students to enroll with systemic misrepresentations of job placement rates and career support services for students.
Today’s announcement is the latest action taken by Attorney General Shapiro to protect students since taking office in January. Attorney General Shapiro recently signed onto a lawsuit filed against Education Secretary Betsy DeVos and the U.S. Department of Education. The lawsuit challenged the Department’s decision to abandon federal rules protecting college students from abusive loan practices by higher education institutions like Corinthian Colleges.
Pennsylvania has more than 200 colleges, universities and trade schools, and approximately 100 other for-profit educational institutions. The average student loan debt for a Pennsylvania college graduate is $34,798 – the second-highest of any state, behind only New Hampshire. In the United States, college debt totals $1.3 trillion, with more than 25 percent of student loan borrowers currently in default.
“With a rising number of students burdened by college loan debt, it’s more critical than ever to protect Pennsylvanians from lenders engaged in unfair loans,” Shapiro said. “We’ll pursue this settlement agreement with Aequitas and file it with the court, and stay vigilant to protect Pennsylvania college students from these deceptive practices.”
In addition to Pennsylvania, the Attorneys General of Connecticut, Iowa, Kentucky, New York, Oregon, Texas and Washington joined the proposed settlement.
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