Students of Corinthian College who took out “predatory loans” while enrolled will be eligible for reductions in loan balances by as much as 40%. In an announcement from the US Consumer Financial Protection Bureau, the $480 million private student loan relief program is part of an ongoing lawsuit is being referred to as nothing less than an illegal predatory lending scheme.

The lawsuit was first filed by the protection agency in September against Corinthian Colleges, alleging that its various schools pushed students into accepting loans with high interest. The allegations include students being harassed into paying debt back while still in school, which for some students prevented them from graduating. In fact, within three years close to 60% of borrowers had defaulted on loans.

After the lawsuit was filed, Corinthian College in Santa Ana California announced that 56 of its campuses were being sold to the ECMC Group, which is a not-for-profit organization primarily servicing student loans for the federal government.

Once critical federal student aid dollars were withheld by the US Department of Education last year, the college company faced a major cash crunch. At the same time, concerns were raised that the company had falsified data for job placements.

Just as the deal with Corinthian College was nearing finalization, the ECMC Group asked the Consumer Financial Protection Bureau to release it from any possible liability associated with the lawsuit. In order for that to happen, ECMC had to offer student loan relief but also vow that similar private loan programs would not be offered to students for a period of no less than seven years.

In a statement from Richard Cordray, director of the US Consumer Financial Protection Bureau, everything possible will be done to ensure consumers get beneficial relief but also, that other students are granted protection from for-profit colleges and universities.

When all is done and said, student loan relief will equate to a 40% decrease in loan balances for private loans that were offered by Corinthian Colleges, known specifically as the “Genesis” loan program. The reduction will apply to all former and current students of Corinthian with outstanding loans of this type, regardless if they went to or are still attending one of the 56 schools sold to the ECMC Group.

In addition, ECMC said it would work with all three of the three credit bureaus to ensure credit history for students with private loans would be erased but also, to make it so debt collectors could not sue the students for loans not yet paid.

After finalizing the acquisition of the Corinthian Colleges, ECMC hired an independent monitor to make sure everything is done accordingly, information that will be reported to the US Department of Education.