Student loan forgiveness a new route
The combination of significant debt and a lack of entry-level jobs has created a difficult situation for many of today's college graduates. But getting out of these loans is notoriously difficult, even if you file for bankruptcy. Traditionally, one of the few ways around repayment, certain public service jobs offer credit forgiveness.
Now some graduates are trying a different approach, claiming they were deceived by the schools they thought would be their ticket to a successful career. Last summer, the U.S. Department of Education created a process that allowed hundreds of former students at Corinthian Colleges, a now-defunct chain of for-profit schools, to seek forgiveness. Overnight, a once-obscure federal provision from the 1990s gained new prominence in the Borrower Defense to Repayment direct loan program.
To add to the pressure, the Federal Trade Commission sued on 27. January 2016 the operators of DeVry University, claiming that DeVry's defrauded consumers about the likelihood that students would find work in their fields. the study. " On the same day, the Department of Education told DeVry that it must stop publishing such graduation applications in its s, and that future lawsuits must be reviewed by an independent auditor. DeVry replied that they "vigorously dispute" the FTC complaint And will request a hearing on the DOE decision.
MarketWatch reported that Undersecretary of Education Ted Mitchell told reporters there were "no days yet" On whether DeVry students would be able to use borrowers to leave their education loans. Here's what everyone with student debt needs to know about this strategy.
New route to loan forgiveness
Federal regulations state, "In any proceeding to recover a Direct Loan, the borrower may assert as a defense to repayment any act or omission of the school attended by the student. Giving rise to a cause of action against the school under current state law. "
What a "reason to act constitutes an open question, although claims that recruitment is based on inflated graduation rates and employment figures have underpinned much of the documentation submitted to date.
In late January, the Wall Street Journal reported that the Obama administration has already forgiven student loans for up to 1,300 Corinthian students, a total of $28 million. This development has also opened floodgates for other disgruntled graduates to seek redress.
An analysis by the Journal found that more than 7,500 people had applied for forgiveness of $164 million in student loans in the last six months alone.Before 2015, only five people had applied for a waiver under the program – and only three of those did successfully, the Journal said.
Greater impact?
Most borrowers asking forgiveness are from nonprofit schools. Based on the data for these students, it is not difficult to see why.
A 2014 Department of Education report found that the average student who received an associate's degree at a for-profit college with 23.590 U.S. dollars in federal loans was encumbered. Yet 72% of them earned less than 999 dropouts on average.This combination of factors has made it difficult for many of them to pay off their debts. The department found that 22% of borrowers at for-profit institutions defaulted on their loans within three years. At the public universities it was 13.
One of the bigger questions is whether the petition wave will spread to more students at traditional universities. The regulatory language does not explicitly single out for-profit colleges, although these schools have been singled out for what some perceive as consistently deceptive recruiting practices.
But the government's actions are already drawing criticism in some circles. In particular, some on the political right warn that President Obama and Education Secretary Arne Duncan are creating a slippery slope where virtually any student who ends up making a bad financial decision can meet his or her responsibilities. That, they say, has the potential to put taxpayers on the hook for perhaps billions of dollars.
The Department of Education has recently begun discussions with various parties, including student groups and colleges, to more clearly define who is and is not eligible for aid. In the meantime, the administration has tried to streamline petitions. It even created a borrower defense hotline at