Consumer Federation of California

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Almost 12,000 students are asking the federal government to discharge their college loan debt, asserting that their school either closed or lied to them about job prospects, according to government data released Thursday.

The figure represents an unprecedented spike in what’s called a “borrower’s defense” claim following the collapse of Corinthian Colleges, a for-profit college chain that had become a symbol of fraud in the world of higher education. Under higher education law, students who believe they were victims of fraud can apply to have their loans discharged.

Officials say they knew of five or so such cases in the past 20 years; some 4,140 have been filed since the Education Department’s June announcement that it would make the debt-relief process easier. Officials say an additional 7,815 Corinthian students have filed claims for debt-relief because their school closed.

Of those closed school claims, the department said 3,128 had been approved, totaling about $40 million in student loans.

The Obama administration is trying to rein in the for-profit college industry, which it says relies too heavily on federal student loans and often misleads students on job prospects. In its latest move, the Education Department on Aug. 28 sent a letter to DeVry University asking the for-profit institution for proof to support its job placement claims.

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Tags: For-Profit Colleges, Student Loans