“It’s all unraveling quickly,” said Bradley Safalow, an analyst with PAA Research, an investment advisory firm in Atlanta. “As a taxpayer, I find it all very depressing.”

Education Secretary Arne Duncan said in June that his agency would make it easier for students at Corinthian and other for-profit colleges to apply for loan forgiveness. Many “ended up with huge debts and degrees that meant little to employers,” he said, while vowing the department would also protect taxpayers.

Lindsey Burke, an education policy fellow at the Heritage Foundation, a think tank in Washington, said students should honor their obligations.

“Any student could go to the Education Department and say they were misled, and the taxpayer picks up the tab,” Burke said.

Borrowers for Santa Ana, California-based Corinthian have the best shot at forgiveness. The company, which owned more than 100 schools in the U.S. and Canada, filed for bankruptcy after the Education Department levied a $30 million fine for misleading students about job prospects. If all 350,000 students who enrolled in its schools over the past five years were granted discharges, the bill might reach $3.5 billion, the department said. Corinthian denies wrongdoing.

Mortgage Crisis

In June, the department chose Joseph Smith, who oversaw a settlement with banks and homeowners who lost their homes in foreclosure, as special master in charge of Corinthian’s student debt discharges.

Other for-profit chains are struggling financially amid allegations of deceiving students and are shutting dozens of campuses across the U.S. They include Pittsburgh-based Education Management, which stopped listing on the Nasdaq stock exchange last year to cut expenses, and faces a U.S. Justice Department civil lawsuit over its marketing. Schaumburg, Illinois-based Career Education Corp., is under investigation by 21 states for its reporting of job placement rates.

ITT Educational, the subject of a U.S. Consumer Financial Protection Bureau complaint alleging loan abuses and a lawsuit by the Securities and Exchange Commission over its financial reporting, may also soon have to close schools, according to Safalow. Those three chains currently enroll about 200,000 students combined.

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