U.S. Education Dept. Cancels Loans for 1,500 Defrauded Students

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November 11, 2019

By Stacy Cowley, The New York Times

Education Secretary Betsy DeVos has been under pressure from lawmakers and the courts over her handling of student-loan relief programs.

About 1,500 students who attended two art institutes that were part of the sudden collapse of a career-school chain this year will have their federal loans canceled, Education Secretary Betsy DeVos said on Friday.

It was a rare victory for borrowers seeking debt relief from a department that, under Ms. DeVos, has frozen or curtailed relief programs for students who claim that schools defrauded them. Borrowers who attended the two schools, the Art Institute of Colorado and the Illinois Institute of Art, sued the department last month, seeking to have their loans eliminated.

“Students were failed and deserve to be made whole,” Ms. DeVos said. Students who attended the schools from late January 2018 through the end of last year, when they shut down, will have their loans for that period canceled, the department said.

Borrowers will still generally owe on federal loans they took out before Jan. 20, the department said in an email sent to borrowers on Friday. Some people, however, may qualify to have all of their loans eliminated through the department’s closed school discharge program.

The decision was the latest twist in the messy unraveling of the chain, Dream Center Education Holdings, which owned dozens of campuses under the Art Institutes, South University and Argosy University brands.

Dream Center was owned by a Christian nonprofit that acquired the troubled group of for-profit schools in late 2017. It closed some schools within a few months, and the entire chain abruptly shut down barely a year later after millions of dollars in federal financial aid funds that were owed to students went missing. The money has still not been recovered.

The accreditation for the Art Institute’s Colorado and Illinois campuses was removed by the Higher Learning Commission in January 2018, around the time Dream Center took them over. The loss of certification meant that students risked being unable to transfer their credits to other schools or have their credentials recognized by employers.

Officials at the Art Institutes never told students that the campuses had lost their accreditation, according to court filings and the Higher Learning Commission.

By law, the Education Department is not allowed to release federal student loan funds to for-profit schools that are not accredited. But the department sent more than $10 million to the two schools and, according to emails and other records, told Dream Center officials that it was working to allow schools to become retroactively accredited.

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My aunt cosigned my student loans, but 12 years later I’m determined never to do the same

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November 5, 2019

By Kelly Burch, Business Insider

college graduate student

During my freshman year of college, there was a five-figure gap between what my financial aid covered and what tuition cost. In hindsight, I should have seen that bill and run to my nearest community college, since the four-year university I was planning to attend was clearly unaffordable.

Instead, I turned to private student loans to cover the cost. As a broke 18-year-old with no official work history, I couldn’t get approved for a private student loan on my own. My parents couldn’t either because of their credit histories. I was panicked, until an aunt offered to cosign an $18,000 loan.

I was incredibly grateful at the time, and still am today. That loan allowed me to get started in a journalism program that kickstarted my career. However, in the 12 years since that loan was dispensed, I’ve learned a lot about cosigning.

I recently refinanced the loan in my own name, and I’ll never ask for a cosigner again. And though I am incredibly grateful for the gift my aunt gave me, I’ll never be a cosigner myself. Here’s why.

Cosigning affects you, even if everything goes well

Many people think a cosigner is merely a backup payee. If the primary borrower doesn’t pay, the lender can go to the cosigner, who is also responsible for the loan. If you think about cosigning this way, there’s little risk, as long as you believe the primary borrower will hold up their end of the deal.

However, that’s not the full picture. When you cosign a loan, it shows up on your credit report. Lenders consider cosigned debt just the same as they would consider debt where you’re the primary borrower. It affects your all-important debt-to-income ratio, which can limit your ability to get additional credit in the future. That means that even if the person you cosigned for is doing everything right, their loan can still change your financial situation.

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https://www.businessinsider.com/aunt-cosigned-student-loans-ill-never-cosign

Advice for getting student loans forgiven, from borrowers who did it

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October 17, 2019

By Ana Helhoski, MarketWatch

Pursuing student loan forgiveness entails a decade of meticulously recorded payments, hours on hold with your servicer and infinite patience. Success, however, arrives without much fanfare.

Public defender Shelly Tomtschik was in court when she got the email notifying her that the quest was over:

“Congratulations! After final review of your Public Service Loan Forgiveness (PSLF) application and payment history, we have determined that you have successfully made the required 120 monthly payments in order to have the loans listed below forgiven.”

“It wasn’t hitting me,” says Tomtschik, 40, of Baldwin, Wisconsin. “I thought it would be more official or something.”

Tomtschik is among the first federal student loan borrowers to get their loans canceled tax-free through the federal Public Service Loan Forgiveness program. The program, launched in 2007, forgives any outstanding balance after 120 qualifying payments for borrowers who take traditionally lower-paying public service jobs.

But the process is tricky. Just 864 of the 88,006 applications filed had been approved as of March 2019, based on the most recently available data from the Education Department. The average amount forgiven: $59,244.
What it takes to get public student loan forgiveness

To qualify for PSLF, borrowers must make 120 monthly, on-time payments while working full time in public service for a qualifying employer. You also must:

Ensure you have only federal direct loans. Some borrowers will need to consolidate into a direct loan. Private loans aren’t eligible.

Enroll in an income-driven repayment plan. Your payments will be a portion of your discretionary income.

Make sure your loans are serviced by FedLoan Servicing, the only company that processes PSLF applications. You can do this by submitting an employer certification form.

Submit employer certification forms to prove you worked for a qualifying government or nonprofit employer while making all 120 payments.

Apply while you’re still working for an eligible employer.

Tomtschik and another successful applicant, Bonnie Svitavsky, a librarian in Washington state, might add another requirement: Document everything.

Svitavsky, a 38-year-old supervising librarian at Pierce County Library, made payments for two years before she found they wouldn’t count toward PSLF. That’s because her loans weren’t enrolled in an eligible repayment plan.

“It was disappointing, to say the least,” she says.

To avoid any future surprises, Svitavsky set alarms to submit certification forms and logged the details of calls to FedLoan.

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https://www.marketwatch.com/story/advice-for-getting-student-loans-forgiven-from-borrowers-who-did-it-2019-10-07

In The News: FTC to pay more than $5.4 million to people scammed by student loan debt relief fraudsters

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October 3, 2019

By Jeanette Settembre, Fox Business

The fraudsters, who made off with at least $20 million, were required to pay up under a 2018 settlement with the FTC, the organization announced in a press release Monday.

The FTC alleged that Los Angeles-based companies using names like Alliance Document Preparation LLC, and Post Grad Aid, bilked millions of people trying to reduce or eliminate their student loan debt. They used social media platforms like Facebook to market their fake relief programs and misrepresented that they were affiliated with the U.S. Department of Education or the loan servicers. The defendants falsely claimed that consumers who paid an upfront fee of up to $1,000 were qualified or approved for permanently reduced monthly payments or loan forgiveness.

The FTC is sending 39,734 checks to people who lost their money, totaling $136.48 each on average. The checks will expire after 60 days, the FTC said, noting: “The FTC never requires consumers to pay money or provide account information to cash a refund check.”

Borrowers have reported receiving emails, letters and phone calls offering them financial relief from their federal student loans. In most cases, these companies don’t offer any relief at all and just take people’s money. One of the most common ways fake companies try to swindle those saddled with debt is by claiming they’ll get rid of student loans without the person having to pay it back, for a small fee. The only legitimate reasons for not paying student loans may include permanent disability, identity theft or in some cases, school closure.

America’s $1.6 trillion student loan crisis has some presidential candidates proposing to cancel student debt and make public college free. And state legislatures are cracking down on student-loan companies.

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https://www.foxbusiness.com/money/ftc-to-pay-more-than-5-4-million-to-people-scammed-by-student-loan-debt-relief-fraudsters