Defrauded Students Can Petition to Get Their Federal Loans Forgiven
A little known law, which forgives the debt for former students who are able to prove that their schools recruited them using false information, has become very popular in recent months. The program is called the Defense To Repayment and in the last six months, over 7,500 people applied to have over $164 million of debt cleared from their accounts. This doesn’t include the $28 million of debt that was cleared for almost 1,300 of the former students at Corinthian Colleges.
Many students are finding that it is difficult to find the employment that the colleges had assured they would receive after graduation. Now that this law is being recognized, hundreds of thousands of students may be able to see a silver lining for their future. It is a way to get out from under this debt, since student loans are not included in bankruptcy options.
The Education Department is overwhelmed from the massive amounts of claims they are receiving, because the forgiveness program that was created in 1994 is very vague with details. It doesn’t specify what is needed to show that a school committed fraud and they are currently working on new guidelines for the program. Because of this, many people that are applying are doing so through attorney assistance or programs that has attorney oversight, providing the best chance of success.
The Education Department is currently trying to figure out how these refunds will be funded, since the cost will be in the billions and will eventually be paid by the taxpayers.
The Education Department’s undersecretary, Ted Mitchell, notes that regardless of the cost, if anyone has been defrauded, they are entitled to this forgiveness and potential reimbursements of what they have already paid out.
The number of applicants has grown because students are becoming more active in how things are done and have researched for ways to fix problems. This law had only been used five times prior to this past year.
The New York Federal Reserve shows that college debt has tripled in the past decade to $1.2 trillion and government data shows that seven million former students have defaulted on their student loans.
Most of the people who have applied for forgiveness of their loans under this program have attended for-profit colleges. The main for-profit colleges were Corinthian owned (Everest, Heald, Wyotech), the Art Institute, ITT Technical Institutes, University of Phoenix, UEI College, Devry, Argosy, Sanford-Brown, American Intercontinental University, (AIU) , The Brooks Institute, Le Cordon Bleu, Colorado Technical University, Kaplan University, Ashford University, Strayer University, Universal Technical Institute (UTI) and they have all been the focus of recent investigations because of their recruiting practices.
One of the students that wrote to the Education Department is Syd Andrade. He was promised “great facilities, great teachers and use of industry-standard software” by an Art Institute recruiter. Mr. Andrade spent most of his class time using outdated software and the students were teaching the teacher most of the time. When he graduated, the school helped him land a job at a local Office Depot for $8 an hour.
The most difficult task that the Education Department faces is determining which debt to forgive. It is tough for the Department of Education to take a petition seriously without a strong case presented, citing which state and federal laws were violated based on that individual’s experience. So, if you are filing a petition, make sure you do a thorough job or get some help.
Unfortunately, many former students may not know that they may be entitled to the debt forgiveness program and many organizations are asking for a blanket wide forgiveness. That request is something that most experts say the Department of Education would never entertain due to the billions of outstanding debt.
If you feel you were defrauded by the school you attended or you are being treated poorly as a distressed borrower by your creditors, contact StudentLoanFAQ's and speak to one of our advisors about student loan forgiveness. You may qualify to consolidate or even wipe out your remaining student loans.