Almost 35,000 former Corinthian College students in California will have the remainder of their private loan balances forgiven and some may receive payment refunds after an investigation by the state attorney general’s office said a loan company engaged in illegal debt-collection practices.

Forgiveness of the remaining balances on the 34,971 accounts owned by Balboa Student Loan Trust will total $67 million in debt relief, state Atty. Gen. Xavier Becerra said Thursday.

“All too often, unfortunately, there are unscrupulous players who engage in unscrupulous practices in some of our postsecondary education institutes, and there are lenders in cahoots that do the same thing,” he said at a news conference.

The settlement comes after a yearlong investigation by the attorney general’s office into Balboa’s debt-collection practices.


According to a complaint filed Wednesday in Los Angeles County Superior Court, the now-defunct Corinthian Colleges steered students toward high-interest private student loans. When Corinthian Colleges began to face federal scrutiny over its job placement rates, the for-profit chain sold nearly all those loans to another company, which then transferred them to Balboa.

The complaint says Balboa erroneously sent borrowers overdue notices that threatened legal action if their loan balance remained unpaid. Balboa had previously agreed to “significant” debt-collection limitations that barred the company from threatening legal action, according to the complaint.

An attorney for Balboa in the settlement did not immediately respond to a request for comment.

Under the terms of the settlement, Balboa will immediately halt debt collections and will refund all payments made by Californians since Aug. 1, which totals more than $500,000, according to the attorney general’s office.


Balboa is also required to refund additional payments made before Aug. 1 by California borrowers who received “problematic” debt-collection notices, an amount that totals about $84,000. The company must also delete all negative credit reporting associated with those loans.

Affected students, including about 23,000 in the Los Angeles area, will receive a letter in the mail from Balboa informing them that their loans have been forgiven. Borrowers will receive checks via mail for their refunds, which could also include the additional payment refund for “problematic” notices before Aug. 1.

samantha.masunaga@latimes.com

Twitter: @smasunaga