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June 08, 2015

The Obama administration is making it easier for students who attended a now defunct college to get their money back.

The Department of Education announced Monday that former students of the for-profit giant Corinthian Colleges may be able to have their outstanding student loans forgiven. If students believe they were the victims of fraud, they can also make claims for debt relief.

Corinthian Colleges was one of this country's largest for-profit chains. The company owned campuses across the U.S. and Canada under the brand names Heald, WyoTech and Everest. Last June, as part of a settlement with the Department of Education, Corinthian agreed to sell 85 of its U.S. campuses and close a dozen more. In April, the Education Department fined the institution $30 million for misrepresenting its job placement statistics.

Related: On the Ropes, For-Profit Giant Corinthian Closes Its Doors

Monday's announcement comes after the Education Department reviewed more than 250 claims against Corinthian from students. The administration is expanding an existing law so that more students will be eligible for debt relief.

The National Consumer Law Center applauded the Department's actions, but also questioned the burden the process will place on students to prove their own claims. 

"The options now available to Corinthian students are complex," said the NCLC in a statement. "This highlights the need for accurate legal advice and guidance for hundreds of Corinthian borrowers throughout the country." 

Critics, though, say taxpayers shouldn't be on the hook for the actions of Corinthian College. Senator Lamar Alexander, Republican and Chairman of the Senate education committee, released a statement acknowledging that students have been hurt, but saying the department was establishing a dangerous precedent. 

"This is one more reason it was a bad idea to make the U.S. Department of Education the banker for students as well as the regulator of their colleges," said Senator Alexander in the statement

This unprecedented move comes at time when for-profit colleges are under increased scrutiny for taking students' money, and failing to provide them with the necessary skills to gain employment.

"There may be more, and we're looking at this with an eye first to doing the right thing by the Corinthian students, but we are also today trying to send a very clear message to this industry," said Education Secretary Arne Duncan in a conference call with reporters. "I wish we could say Corinthian is the last of these situations, but that is not reality."

Related: Students Brace for Corinthian Shutdown

The Department of Education estimates about 15,000 students will be eligible for loan forgiveness. The Department is reaching out to these students over email.

corinthian colleges, department of education

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