Consumer Federation of California

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There is no quick relief in sight for thousands of former Corinthian College students seeking loan forgiveness in the wake of the for-profit giant’s collapse.

The Obama administration said Thursday it will take several months before the government forgives the federal student loans of borrowers who believe they were defrauded by the career college chain. The timeline comes as former Corinthian students contemplate suing the government for collective debt relief rather than waiting for officials to sort through each individual claim.

“Creating a new system to handle thousands of claims will take a little time … we know borrowers and taxpayers are counting on us,” said Education Under Secretary Ted Mitchell on a call with reporters Thursday.

By law, students can apply to have their federal loans discharged if they can prove a school used illegal or deceptive tactics in violation of state law to persuade them to borrow money for college. The process, known as a “defense to repayment claim,” has rarely been used and is widely considered to be complicated and difficult to navigate.

As it began receiving hundreds of claims from Corinthian students, the Education Department appointed an independent monitor in June to oversee and streamline the process. In his first report released Thursday, monitor Joseph A. Smith said the department has hired four attorneys to review and analyze state laws involved in the 4,140 claims received to date.

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Tags: For-Profit Colleges, Student Loans