Finally: Student Debt Forgiveness For Victims Of Predatory, For-Profit Schools (VIDEO)

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Nov. 28, 2012 - Santa Ana, California, U.S. - A high-rise in Santa Ana houses the headquarters for Corinthian Colleges. (Credit Image: © Ana Venegas/The Orange County Register/

In February a group of 15 former students of Corinthian Colleges Inc. (CCI) began a student debt repayment strike. The Corinthian 15, as they soon came to be known, were victims of one of many predatory for-profit schools in the United States. Although the school was fined hundreds of millions of dollars for fraudulent and deceptive practices, students who were victimized by the educational corporation found themselves on the hook for their student loan debts. Even after CCI filed for bankruptcy, and the corporation’s own debts were discharged, students were required to repay 60 percent of their student loans.

The Corinthian 15 quickly became the Corinthian 100, as more students joined the original strikers. With plenty of state and federal court rulings to back them up, the debt strikers alleged that, as the victims of fraud, they were not responsible for debts accrued while attending any of CCI’s schools. The former students were granted meetings with the Department of Education and the Consumer Financial Protection Bureau, in May.

A recent decision by the Department of Education means that most, if not all, Corinthian students will be eligible to have their student loans discharged.

The decision goes even further, however, establishing a line of defense, not just for victims of CCI scam schools, but all students who believe that they were defrauded by any predatory, for-profit college.

According to a study conducted by the Department of Treasury, on behalf of the Department of Education, for-profit colleges cost four times more than community colleges. The report shows that 80 percent of for-profit students borrow money, compared to less than half of students who attend public colleges. While students of for-profit schools make up only 11 percent of higher education population, for-profit school borrowers are responsible for 44 percent of all student loan defaults.

Like CCI schools, many of these for-profit schools offer degrees that aren’t worth the paper they’re printed on.

From the Department of Education website:

“Under the law, you may be eligible for loan forgiveness (a discharge) of the federal Direct Loans you took out to attend a school if that school committed fraud by doing something or failing to do something, or otherwise violated applicable state law related to your loans or the educational services you paid for. This can apply to you regardless of whether your school closed. This process is called defense to repayment, and the law requires borrowers to submit a claim in order to receive debt relief. Through defense to repayment, you may be able to have your entire outstanding federal Direct Loan forgiven, and be reimbursed for amounts you have already paid.”

According to the Department of Education:

The Department of Education is creating a process to make it as easy as possible for borrowers who attended schools that violated the law to seek loan forgiveness (discharge) based on borrower defense to repayment.

The site explains how students who believe they are the victims of fraud can request a loan discharge. For more information on where and how to submit those requests, use this link.

It’s a step in the right direction, but it doesn’t go far enough. The process is still lengthy and it still places the entire burden on the student.

As The Young Turks explain in the video below, the Department of Education failed to meet a July 2 deadline for helping student borrowers, as specified in a March executive order, signed by President Obama. Under the order, the Department of Education was directed to improve the standards of practice used by debt collectors, many of which break federal law, when demanding repayment of student loans. The Department was also ordered to create materials that would inform borrowers of their rights. A third directive instructed the agency to create a plan for loan discharge due to borrower disability.

Here’s more on the missed deadline, from TYT.

It’s not all bad news though. In response to the Department of Education’s failures, President Obama is expected to announce a new “Student Aid Bill Of Rights,” on July 14.

The Huffington Post reports that the president’s plan includes:

“recommendations for a new Education Department complaint system so grievances filed by students and borrowers are referred to regulators and law enforcement agencies; mandatory disclosures by the Education Department when borrowers’ accounts are shuffled between loan companies; and a directive that the Education Department increase its cooperation with White House offices and other government agencies when it comes to understanding borrower behavior, identifying trends in student debt, and improving its interactions with its loan contractors.”


Reprinted with permission from Addicting Info

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