DeVos Replaces Full Debt Relief With Earnings-Based Formula - Corinthian Victims Get Pennies on Dollar

On December 21, 2017, Secretary Betsy DeVos announced a radical departure from Obama administration policy by implementing an earnings-based formula for Corinthian Colleges debt relief that denied full forgiveness to fraud victims and calculated partial relief based on post-graduation earnings. Under DeVos’s formula, students whose earnings were less than 50% of peers in similar programs received full relief, those earning 50-59% of peers received only half relief, and those earning 90% or more received just 10% relief—blaming victims for the fraud perpetrated against them.

The earnings-based approach was a cruel mockery of debt relief for fraud victims. Corinthian had falsified job placement rates by up to 80% and provided near-worthless education, but DeVos held students responsible for their inability to find good jobs with fraudulent degrees. Students who managed to find any employment despite Corinthian’s fraud were penalized with reduced or eliminated debt relief. The formula ignored that Corinthian degrees themselves impeded employment—many employers recognized them as markers of exploitation rather than education.

DeVos processed 12,900 applications and approved partial relief while denying 8,600 claims entirely, a dramatic reversal from the Obama Education Department which provided full debt discharge for defrauded Corinthian students. California Attorney General Xavier Becerra condemned the decision as illegal, noting it violated the Department’s own regulations and court orders. The partial relief system created years of additional bureaucratic delays as the Department calculated individual earnings and relief amounts while students remained in default, facing wage garnishment and credit destruction.

The policy exemplified how regulatory capture serves industry over victims: DeVos protected taxpayers from “excessive” relief for fraud victims while ignoring that Corinthian had extracted $1.4 billion annually in federal aid through fraud, executives had extracted millions in compensation, and the company used bankruptcy to shield assets. Students—mostly low-income, minority, and female borrowers—were left with debt they couldn’t discharge in bankruptcy for education obtained through fraud, with relief calculated to minimize government outlay rather than make victims whole.

The earnings-based formula was eventually challenged in court and contributed to findings that DeVos systematically violated borrower defense regulations and court orders. But the damage was done: thousands of Corinthian students spent years fighting for full relief, many defaulting and facing collections, while DeVos slow-walked processing and imposed arbitrary obstacles. The policy demonstrated that for the Trump Education Department, protecting the for-profit college industry and minimizing relief costs mattered more than helping fraud victims escape debt.