Following Sen. Brown Action, Administration Announces For-Profit College Students Defrauded by Corinthian Colleges Will Not be Taxed on their Loan Forgiveness

Students of Corinthian Colleges who had Federal Loans Forgiven Faced Taxation on their Loan Forgiveness

WASHINGTON, D.C. – Following a letter from U.S. Sen. Sherrod Brown (D-OH) and his congressional colleagues, the U.S. Department of the Treasury (Treasury) today announced that students who attended Corinthian Colleges, Inc. and have had their federal loans discharged through the defense to repayment process will not be taxed on this loan forgiveness. Earlier this year, the U.S. Department of Education (ED) announced it would settle and discharge the federal loans of Corinthian students who were the victims of the institution’s fraud and misrepresentation. Because these discharges could be considered as “income” under federal tax law, the students faced a tax liability. Treasury’s response to Sen. Brown can be found here.  

“The debt relief offered to students defrauded by Corinthian Colleges, Inc. should not create an additional tax burden on them,” said Brown. “I’m glad the Administration is taking action to ensure that these loan discharges will benefit students as intended. We must continue to support students’ right to quality education and crack down on the deceitful tactics of many for-profit colleges.”

Brown continues to work to protect students from for-profit institutions’ predatory practices. In October 2015 – following a report in The New York Times – he called on ED to stop billions in federal funds from being provided to potentially fraudulent for-profit institutions. In a letter to ED Under Secretary Ted Mitchell, Brown urged ED to increase efforts to prevent student aid funding from going to fraudulent institutions, specifically by working with state and federal authorities currently investigating for-profit schools to determine appropriate spending restrictions.

In September 2015, Brown cosponsored the Students Before Profits Act of 2015, legislation that would hold for-profit educational institutions and their executives accountable for misleading students and poor performance, ensuring that students receive a quality education.