THECOMMONWEALTH OF MASSACHUSETTS

OFFICEOF THEATTORNEY GENERAL

ONEASHBURTON PLACE
BOSTON, MASSACHUSETTS02108
TEL:(617)7272200
www.mass.gov/ago

MAURAHEALEY
ATTORNEYGENERAL

February4,2015
TheHonorableArneDuncan
UnitedStatesDepartmentofEducation
400MarylandAvenue,SW
Washington,D.C.20202
DearSecretaryDuncan,
I writetoexpressmysupportfortheviewsofSenatorsWarren,Blumenthal, Durbin,Hirono,Merkley,
Reed,Whitehouse,Baldwin,Boxer,Franken,Markey,Murphy,andSchatzsetforth intheirDecember
9,2014letter(the"Senators'Letter"). TheSenators'LetteraskstheDepartment"toimmediately
dischargefederalstudentloansincurredbyborrowerswho haveclaimsagainstCorinthianColleges,
Inc.,includingthoseborrowerscoveredbythelawsuitsfiledbytheMassachusettsAttorneyGeneral.. .
WerequestthattheDepartmentdoso promptly,andrelieveMassachusettsstudentsoftheunlawfully
induceddebtswhichCorinthiancausedthemtoincur.
TheMassachusettsAttorneyGeneral'sOfficeconductedalengthyinvestigationofCorinthianColleges,
Inc.,withtheinitialsubpoenaservedinearly2011. OurinvestigationfoundthatCorinthianengagedin
numerousactsofdeceptionandunfairnessinviolationofMassachusetts' consumerprotectionlawsand
theMassachusettsAttorneyGeneral'sregulationsthatexplicitlyaddresstheconductofcareer schools.
CorinthianrelentlesslypursuedpotentialMassachusettscustomers,misleadingthemandpreyingon
theirhopesandfearsinanefforttosecurefederalstudentloanmonies. Specifically,ourinvestigation
foundCorinthianmisrepresentedtoMassachusettsstudents:

theurgencyofenrollmentandtheneedtoenrollimmediatelyin Corinthianschools,
theschool'shistoricalsuccessinfindingjobsinthestudents'fieldofstudy,
theearningsofgraduates,
theemploymentassistancetheschoolprovidesgraduates,
thenature,character,andqualityofeducationalprograms,
thetransferabilityofcredits,
theavailabilityofextemships,and
thenatureandavailabilityoffinancial aid.

OurlitigationcomplaintpendinginSuffolk SuperiorCourtinBostonprovidesavarietyofexamplesof
theseunlawfulactions,andalsosetsforthCorinthian'sgeneralsystemicplanfordeceiving
Massachusettsstudents. Ourprincipalreasonforfiling ourstatelawenforcementactionwasand
continuestobeourdesiretohelpstudentswho wereinducedbytheschool'smisrepresentationstoincur
substantialdebtwhichthey arenowunabletorepay. Inourview,theviolationsofstatelawsetforthin
theCommonwealth'scomplaintsupportafulldefensetorepayment.

WeagreewiththeSenators'Letterthataccountability inthisareaisessential,bothfromthestandpoint
ofdeterrenceandoffairnesstostudents. Schoolsshouldnotobtainpublicmoniesbasedonactionsin
violationofstatelaw,andstudentsshouldnotberequiredto payforsuchviolations.1 Basedonour
investigativefindings,webelievethefederalloansofCorinthianstudentsinMassachusettsshouldbe
canceled. WearewillingtoassisttheDepartmentinanywaywecantocreateasimpleandspeedy
processinordertoimplementsuchcancellation.
TheneedtocancelstudentloansisparticularlyacuteinCorinthian'scase. Theschool'sliabilitieslikely
exceeditsassets,andtheschoolhasstatedthatintheabsenceofalifelinefromtheDepartmentitwould
fileforbankruptcy. Whileourlawsuit,filedlastApril,seeksfullrefundsforstudents(aremedybroader
thanthecancellationofstudentloans),givenCorinthian'sfinancialposition,thesurestwaytohelp


2
studentswillbethroughcancellationoftheirfederalloans.
TheDepartment'sauthorityisthuscrucialnotonlytothestudentsburdenedwithdebtasaresultof
Corinthian'sunlawfulconductbutalsotothestatesthathaveconductedinvestigationsofCorinthian.
Wherestateinvestigationsofschoolsfindactsorpracticesinviolationofstatelaw,andwhere
Corinthian'scircumstancessuggestthatlitigationmaynotachieve promptandmeaningfulrelief,itis
essentialtoprovideanefficientmechanismforloancancellationorforgivenesstostudentsinjuredby
theschool'smisconduct.
Thismeans,inourview,specifyingwhatconstitutesaborrowerdefensesufficienttojustifycancellation
ofstudentloans,and,moreover,whatprocesswill beusedtorecognizethedefense. TheDepartment's
guidanceisparticularlyimportantwhereastateinvestigationfinds widespreadschoolmisconductwhich
wouldjustifyacompletedefensetorepaymentofstudentloansunderthelawofthestate. (Anexample
isdeceptivestatementsormisrepresentationsonwebsitesorinwrittenmaterialsprovidedtoprospective
students.) Insuchcases,aunifiedprocessdealingwithalargenumberofstudentswillbemoreefficient
andmuchfairerthanpiecemealdeterminationofindividualclaimsbythosefewstudentsableto
navigatetheprocessontheirown.
WeagreewithyourAugust2014statementinresponsetoaSenateinquiry,inwhichyounotedthat
studentsmustnotberequiredtodefaulton theirloansandthentodefendacollectionactionincourt.3
Torequirestudentstodefaultbeforetheycanasserttheirrightswouldbe neitherfairnorappropriate.
Foronething,sucharequirementwouldplacestudentsintheuntenablepositionofdefaultingwithouta
determinationthatthedefenseisjustified. Foranother,thecostofdefendingacollectionactionor
administrativegarnishmentorsimilarproceedingmaywell exceedthevalueoftheloan(in

'DepartmentofEducation Letterin ResponsetoSenateinquiry,dated August4,2014("T]heDepartmentrecognizes asa

defensetorepaymentof DirectLoansaclaimthatthe borrowerhasagainsttheschool thatis basedonthemakingofthe loan
ortheprovisionofeducational services,ifStatelawrecognizes suchaclaim andiftheborrower provestheelementsrequired
toestablishtheclaim....[T]heborrowerisnotrequired tosueorobtainajudgmentagainsttheschool inorderto assertthe
...defense").
2 Whiledirectrecoveryfrom

Corinthianposessignificant challenges,wearenot rulingoutsuccessorliability asameansof

recompense. However,thisraisesadditionalissues understatelaw.
3

See Footnote1,supra.

Massachusetts,thetypicalCorinthianloanforgraduateswasinthe$8,00010,000range,andfor
dropouts,whocompriseasubstantialportionofstudents,itwasmuchlower). Incaseswherestate
investigationsfindsystematicmisconductinvolvinghundredsofstudents,itwouldbeinefficientto
requireeachstudenttoseparatelydefendacollectionactionandtorequireadjudicationofnumerous
separateactionsinvolvingcommondefenses.
Inourview,stateattorneygeneralinvestigativefindingsofrelevantstatelawviolationsshouldbe
consideredsufficienttoestablishborrowerdefensestorepayment.Inthealternative,theDepartment
maydecidetoconductitsowninvestigationoftheschool'sconductanduseanadministrativeprocessto
establishtheborrowerdefenses.4
Withrespecttotheimplementationofborrowerdefenses,webelievethatonceschoolmisconduct
constitutingadefenseisestablished,theDepartmentshouldtakeappropriateadministrativeactionto
canceltheloans. ShouldtheDepartmentneedinformationortestimonyfromstudents,ourofficeis
availabletoobtainsuchinformationfromstudentsinMassachusettsorguidethemthroughtheprocess.
WehaveworkedcloselywiththeDepartmentinprovidingloanreliefforstudentsofforprofitschools
enteringintoconsentjudgmentswithouroffice,andweverymuchappreciatetheassistancerepeatedly
providedbyDepartment staff. ForCorinthianstudents,however,suchreliefisnotpossible. Weurge
theDepartmenttotakeactiontocancelthesestudents' loans.
Iameagertospeakwith youaboutthismatter.Inthemeantime,withanyquestionspleasealsocontact
GlennKaplan,ChiefoftheInsuranceandFinancialServicesDivisionintheMassachusettsOfficeofthe
AttorneyGeneral,at6179632453.
Sincerely,

AttorneyGeneralofMassachusetts

4Thismay beamatterinwhich stateenforcerscanintervene withtheassentofthe Departmentandassistin theprosecution

ofthematter.