For-profit colleges case settled for more than $192M

Vancouver students, others to receive debt relief after suits over Corinthian chain’s lending practices

By Katie Gillespie, Columbian Education Reporter

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Aequitas Capital Management will offer about 2,000 Washington students — including some in Vancouver — more than $7 million in debt relief after it participated in predatory lending practices, according to an announcement by the Washington Attorney General’s Office.

The Lake Oswego, Ore.-based company must forgive the loans of 1,241 students who defaulted on their loans, totaling more than $5 million in relief, according to the news release. Another 717 borrowers whose loans are still active will see their outstanding balance reduced by 55 percent, worth more than $2 million. Aequitas will forgive the loans of some Washington borrowers whose campuses closed, as well. The 13-state settlement will see Aequitas pay out more than $192 million to students in total.

The announcement brings to a close about three years of legal wrangling for the investment firm, which provided financing and liquidity to Corinthian Colleges students. The for-profit Corinthian chain owned and operated seven Everest College campuses in Washington, including one in Vancouver, until February 2015, when Zenith Education Group purchased the assets. Zenith announced the Vancouver campus’ closure in December 2015, consolidating that campus and the Portland campus at its Tigard, Ore., location. The Vancouver campus at the time served 120 students, according to Columbian archives.

It’s unclear how many Vancouver students will be affected by the settlement. A spokeswoman with Attorney General Bob Ferguson’s office said the office doesn’t have a breakdown of where affected students are located or how much money they may be entitled to.

“Aequitas exploited the broken promises that Corinthian made to Washington students,” Ferguson said in the announcement. “These student borrowers deserve relief.”

Aequitas made more than $500 million in private loans to students at the college, according to the news release. Through its affiliate, Campus Student Funding, Aequitas bought the loans from Corinthian for about half the initial value, allowing the company to make a significant profit on repaid loans. Corinthian agreed to buy back any loans more than 90 days delinquent, protecting Aequitas from financial risk if the loans defaulted.

But the Consumer Financial Protection Bureau sued Corinthian Colleges in 2014, and the company ceased operating in April 2015. When Corinthian filed for bankruptcy, Aequitas too collapsed because it had to hold the defaulted loans the college chain planned to buy back. Instead, Aequitas turned to new investors in its management business to repay prior investors and maintain operations, instead of investing new clients’ funds as it had promised.

In March 2016, the Securities and Exchange Commission sued Aequitas, saying it hid the “rapidly deteriorating financial condition of its enterprise while raising more than $350 million from investors.”

Aequitas was shut down and placed into receivership after the suit, according to the announcement.

Former Corinthian students may also be eligible for forgiveness of their federal student loans. In April 2015, Ferguson and eight other attorneys general signed onto a letter to the U.S. Department of Education urging the federal government to help students victimized by Corinthian and other for-profit schools. The department responded in 2016, ruling Corinthian misrepresented job placement rates for its degree programs.

The Attorney General’s Office has created a Student Loan Survival Guide, available at www.atg.wa.gov/studentloanresources, and urges anyone with questions about student loan servicers to visit the site.