Former student files suit over Corinthian debt

By Jennifer C. Kerr
Associated Press

WASHINGTON (AP) - A California mother of two and a former student of the now-defunct Corinthian Colleges filed a federal class-action lawsuit last Thursday, seeking damages and an end to daily collection calls over private loans she received to attend the for-profit school.

Attorneys for Deborah Terrell say the case could involve thousands of ex-Corinthian students and millions of dollars.

Terrell, of Riverside County, is suing the company that bought her loan debt and the debt collector, alleging they knew Corinthian was accused of massive fraud when they bought the debt.

Terrell took out about $19,000 in loans to attend Corinthian's Everest College in 2014 for a nine-month medical administrative assistant program. In her complaint filed in Los Angeles, Terrell says she was lied to by Corinthian recruiters about job prospects and potential earnings after graduation.

Terrell got straight As in all her classes and received special awards and recognition. What she still doesn't have is a job in her field of study, according to the lawsuit. Most of the loan money she received was in the form of federal student loans, which have since been forgiven by the Education Department. For the private loan money, originally $4,900, her lawyers say she gets about five phone calls a day from collectors harassing her.

"These private lenders are victimizing these students a second time by continuing to try and collect on debt that was incurred through fraud and deceit," said Anne Richardson, directing attorney of the Consumer Law Project at Public Counsel.

The lawsuit seeks class-action status and names Turnstile Capital Management, LLC, the debt buyer; Balboa Student Loan Trust, the debt holder; and University Accounting Service, LLC, the debt collector. The debt was bought from Corinthian, which had created its own loan program. At the time of the sale, the suit says, Corinthian was under investigation by more than 20 states' attorneys general as well as federal officials.

A whistleblower raised concerns about Corinthian in 2011, alleging that employees of the for-profit chain fabricated employers to make it appear as though unemployed graduates had secured good jobs in their areas of study. California's attorney general filed a lawsuit in 2013, alleging rampant lies to students about job placement.

Corinthian filed for bankruptcy protection last year, closing schools and leaving thousands of students with hefty debt.

The Education Department continues to vet thousands of requests from Corinthian students for relief from their federal loans. So far, it has erased the debt for more than 11,000 former Corinthian students, totaling more than $170 million. That number is expected to go up, with an estimated $3.6 billion in federal loans given to Corinthian students.

Published: Mon, Jul 18, 2016