University of Phoenix to cancel $141 million in student debt

December 12, 2019

By Scott Olson, NBC News

The University of Phoenix and its parent company have agreed to pay $50 million in cash and cancel $141 million in student debt to settle allegations of deceptive advertisement brought by the Federal Trade Commission.

The deal, announced Tuesday, settles a dispute over an ad campaign the for-profit college launched in 2012 touting partnerships with companies including Microsoft, Twitter and Adobe. It suggested the school worked with those companies to create job opportunities for students, even though there was no such agreement, investigators found.

Image: University Of Phoenix

The Federal Trade Commission said the settlement is the largest the agency has ever obtained against a for-profit college.

“Students making important decisions about their education need the facts, not fantasy job opportunities that do not exist,” said Andrew Smith, director of the Federal Trade Commission’s Bureau of Consumer Protection.

The University of Phoenix said in a statement that much of the dispute focused on a single ad campaign that ran from 2012 to 2014. It said it agreed to the deal “to avoid any further distraction from serving students.”

“The campaign occurred under prior ownership and concluded before the FTC’s inquiry began. We continue to believe the University acted appropriately,” the company said.

Apollo Education Group owns the University of Phoenix. The Arizona-based for-profit college chain has 55 campuses across the nation and teaches thousands of students through its online programs. It’s the nation’s largest recipient of GI Bill tuition benefits for military veterans.

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https://www.nbcnews.com/news/us-news/u-phoenix-agrees-cancel-141-million-student-loan-debt-n1099681

‘I’m working until I’m 75’: Factory worker describes family’s student debt nightmare

December 2, 2019

By Aarthi Swaminathan

Student debt isn’t just a student problem. Across the U.S., many parents also struggle with the burden of student loans.

A recent survey by Freedom Debt Relief found that 37% of 1,506 American adults said their children’s college education cost has made them feel financially overwhelmed. And 20% said that the stress has contributed to mental or emotional health issues.

More than 40% said education costs impacted their retirement plan, with 31% indicating that they had “given up retiring when they initially desired.”

Yahoo Finance spoke with one parent in a particularly difficult student loan situation: a 60-year-old factory worker from Scranton, Pa., who had cosigned a loan for his son. (The man, whom we’ll call Frank, asked for anonymity to protect his son.)

Student debt is affecting parents of borrowers‘It’s not nice for a hard-working middle class family’

Frank’s student debt experience began when his son got into a college. As a “middle-class working family” that brings in about $75,000 a year, Frank and his son started borrowing.

The son fell seriously ill after attending the school for one-and-a-half years and dropped out. After his health improved, the son decided to resume his education at a different school. All the while, both father and son continued to borrow.

The expenses began mounting: The family had a refinanced mortgage and credit card debt, as well as home and car insurance to pay. On top of that, they had recurring medical bills. And there was the possibility of more kids going to college.

“[With] some of my bills, I was in no position to barely help myself,” Frank said.

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https://finance.yahoo.com/news/student-debt-family-burden-175514385.html

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

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

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

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

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

In The News: Millennials have an average of $28,000 in debt—and the biggest source isn’t student loans

September 20, 2019

By Megan Leonhardt, CNBC

It may seem like student loans and millennials are inextricably linked. But a new survey shows that education bills are not the leading source of debt among this generation.

Millennials (defined here as ages 23 to 38) have racked up an average of $27,900 in personal debt, excluding mortgages, according to Northwestern Mutual’s 2019 Planning & Progress Study. The findings are based on a survey conducted by The Harris Poll of over 2,000 U.S. adults.

The biggest source of debt? Credit card bills. And that’s a “troubling” trend, Chantel Bonneau, a financial advisor with Northwestern Mutual, tells CNBC Make It.

“One issue that a lot of millennials have is that they have not wanted to sacrifice their lifestyle, even though they have student loans or lower incomes,” Bonneau says. “That has left us in this spot where they’ve accumulated a significant amount of credit card debt.”

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https://www.cnbc.com/2019/09/18/student-loans-are-not-the-no-1-source-of-millennial-debt.html

 

In The News: Raising the Bar for Loan Forgiveness

September 16, 2019

By Andrew Kreighbaum, Inside Higher ED

In her first significant act as Education Secretary more than two years ago, Betsy DeVos said she planned to overhaul an Obama administration student loan rule designed to protect borrowers defrauded by their college.

Despite her efforts, the Obama borrower-defense regulations took effect last year. But on Friday DeVos capped off a two-year effort by issuing her own rule, which scales back loan forgiveness opportunities for student borrowers.

The new regulations significantly raise the bar for student borrowers seeking debt forgiveness based on claims they were defrauded by their colleges. They add a new three-year time limit for those borrowers to file claims, and each case will be considered individually, even if there is evidence of widespread misconduct at an institution.

Borrowers will also be asked to demonstrate they suffered financial harm from their college’s misconduct and that the college made deceptive statements with “knowledge of its false, misleading, or deceptive nature.”

The collapse of the Corinthian Colleges chain and subsequent flood of debt-relief claims prompted Education Department officials under the last administration to issue the 2016 borrower-defense rule.

Although the rule was a response to misconduct in the for-profit college sector, it applied to all Title IV institutions. And private nonprofit college groups had expressed concerns that their institutions could be on the hook for student claims even for unintentional mistakes in marketing materials. DeVos had made clear previously that she thought the regulations were too permissive, essentially offering borrowers the chance at “free money.”

“We believe this final rule corrects the wrongs of the 2016 rule through common sense and carefully crafted reforms that hold colleges and universities accountable and treat students and taxpayers fairly,” she said in a statement accompanying the rule.

Education Department officials said the new three-year time limit for claims aligns with record-retention requirements for colleges. They said the process will give institutions the opportunity to respond to claims and students the chance to elaborate on claims based on those responses.

The DeVos regulations will save the federal government about $11 billion over 10 years, the department estimates (the federal government shoulders the cost of loan discharge if it cannot recoup funds from the institutions themselves). Consumer advocates argue those savings are created by rigging the system against borrowers.

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https://www.insidehighered.com/news/2019/09/03/devos-imposes-tougher-debt-relief-standards-student-borrowers-alleging-fraud

 

In The News: Families, Not Just Students, Feel The Weight Of The Student Loan Crisis

September 4, 2019

By Elissa Nadworny, NPR

Middle-income family in debt.

For many college students settling into their dorms this month, the path to campus — and paying for college — started long ago. And it likely involved their families.

The pressure to send kids to college, coupled with the realities of tuition, has fundamentally changed the experience of being middle class in America, says Caitlin Zaloom, an anthropologist and associate professor at New York University. It’s changed the way that middle class parents raise their children, she adds, and shaped family dynamics along the way.

Zaloom interviewed dozens of families taking out student loans for her new book, Indebted: How Families Make College Work at Any Cost. She defines those families as middle class because they make too much to qualify for federal aid — but too little to pay the full cost of a degree at most colleges. For many, the burden of student debt raises big questions about what a degree is for.

This conversation has been edited for length and clarity.

How would you describe the world of student debt?

Families have really been transformed by debt, and really by the problem of dreaming about sending a kid to college and trying very hard to pay for it — oftentimes from the very earliest moments of a child’s life. I think what we don’t take account of, nearly enough, is what that experience is like — [what] the experience of trying to give a kid a shot by sending them [to] college means for most middle class families.That’s the thing that I think that we need to be focusing on.

You argue in the book that the idea of going to college is pervasive in American life.

It is pervasive. That message is coming at families from every direction: that being a success in America depends upon the ability to get into college, to get an education and to graduate. But that itself depends on the ability to pay, which thrusts us right into the paradox of it all — which is that on the one hand, young adults and the parents who support them have this very clear goal about getting a college education. On the other hand, that is going to cost them dearly.

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https://www.npr.org/2019/09/04/755221033/families-not-just-students-feel-the-weight-of-the-student-loan-crisis

In The News: Americans are staying silent on student loan debt—and it’s not helping

August 19, 2019

By Megan Leonhardt, CNBC

When it comes to uncomfortable conversations, Americans would rather talk about pretty much anything else — politics, health issues, religion — than discuss their finances.

Yet the money topic Americans voted as most thorny is one that’s constantly in the news: student loans. Over a third of Americans say they see student loan debt as the biggest financial taboo, according to a Harris Poll of over 1,000 U.S. adults commissioned by TD Ameritrade.

A similar survey conducted by the MIT AgeLab and sponsored by TIAA found that 40% of respondents reported they never talk to their family about their student loans. In fact, over half said their families know “nothing” or “very little” about their debt.

Yet you’re far from unique if you’re swimming in student loan debt. Americans have amassed $1.5 trillion in student loan debt, with one in four Americans carrying a balance. And both the prevalence and the effect of student loans is widely studied: the Fed found that 20% of the homeownership decline among millennials (ages 24 to 32) can be attributed to this debt. Other surveys have found that student loan debt is forcing millennials to put off other major life milestones, such as getting married and starting families.

Democratic 2020 presidential candidates are even making student loan debt solutions a core component of their campaigns — promising everything from better refinancing options to introducing more debt forgiveness programs to wiping it out completely.

So why aren’t people talking about their student loans around the dinner table or with friends over drinks? It’s personal, experts say. “Student loan debt may be pervasive and a constant topic in the media and in the political arena, but it’s still debt,” Erin Lowry, author of Broke Millennial Takes On Investing, tells CNBC Make It. “People are fundamentally uncomfortable talking about debt because it’s easy to assume another person is going to pass judgement on your choices.”

And boy do they.

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https://www.cnbc.com/2019/08/07/student-loans-are-the-most-uncomfortable-conversation-topic-for-americans.html