Cody Roderiques, a college senior, owes the federal government more than $100,000 for his student loans. He may not have to pay taxpayers back.
That’s because the New England Institute of Art is vanishing around him. On the campus of the for-profit college near Boston, studios were shuttered, teachers lost their jobs and the school announced in May it was closing for good. Under U.S. law, the institution’s death might excuse Roderiques, who will graduate in December, from his loan debt.
As education companies shrink amid government allegations that they misled students about the value of their degrees, tens of thousands of students may be able to walk away from their obligations, a scale of college-loan forgiveness unprecedented in U.S. history. The unwinding may cost taxpayers billions, touching off debate in Washington about fairness and personal responsibility.
“I’m paying back a school that doesn’t exist and that I don’t get any benefit from,” said Roderiques, 22, who is organizing students to ask the federal government for loan forgiveness. If he succeeds, other borrowers “will be right behind me.”
The push for loan cancellations intensified with the May bankruptcy of Corinthian Colleges Inc. and is spreading to other large for-profit colleges, such as Education Management Corp., which owns the chain of Art Institutes that Roderiques attends and whose stock doesn’t trade anymore after losing nearly all its value.
Louisiana Protest
To make their case, dozens of borrowers with loans taken out for those two companies, as well as for ITT Educational Services Inc., are protesting this week outside a gathering of college financial aid officers in New Orleans. Education Management said it helps borrowers understand loan commitments and is offering students at its closing schools a chance to finish their degrees. The companies all deny wrongdoing.
The situation shows how the for-profit college implosion, like the end of the mortgage boom, may haunt the economy and taxpayers for years. Students may be eligible for relief under federal law if they can show schools deceived them into enrolling, as well as when schools shut down and they can’t complete their studies. Before Corinthian’s demise, few students ever applied for relief.
For-profit college borrowers hold about $230 billion in federal loans, a fifth of U.S. higher education debt, according to an estimate by Mark Kantrowitz, publisher of Las Vegas-based Edvisors.com, a financial-aid website. For-profit college students represent about 11 percent of college students and account for almost half of all defaults on U.S. education loans.
‘Unraveling Quickly’