Student loan debt is an enormous problem in the Chicago area and across the country. There are certain loan forgiveness programs that some debtors can rely upon if they meet the necessary requirements. In numerous cases of debtors who were defrauded by for-profit schools, a federal loan forgiveness program was supposed to come to the rescue. However, according to a recent article in The New York Times, that “government program meant to forgive the federal loans of cheated students has all but stopped functioning.” In short, tens of thousands of borrowers seeking relief from deceptive lending tactics under a “borrower defense” program are not getting the relief they were promised.
Claims for Loan Forgiveness are “In Limbo”
The student loan borrowers at the center of the article are those who assert that they “were victims of fraud, left with useless degrees and crushing debt.” Some of those borrowers went to Corinthian Colleges, a name that many consumers now associate with harmful for-profit schools and fraudulent student loan lending tactics. Other students attended institutions that are less well known, but also were for-profit institutions alleged to have defrauded students, such as the Minnesota School of Business or the New England Institute of Art. Most of these for-profit schools have faced lawsuits from state attorneys general alleging fraud and other deceptive practices.
When tens of thousands of similar borrowers sought forgiveness for their student loans, they expected to hear back from the federal government. However, staff members with the U.S. Department of Education have “fought in court to reduce the amount of relief granted to some students and to halt a rule change intended to speed other claims along.” The article underscores that these actions have “left more than 100,000 claims for relief in limbo.”
Learning More About the Borrower Defense Program
These former students are seeking relief through the “borrower defense” program, which permitted borrowers from for-profit institutions to file claims for relief after those schools closed. About 30,000 of these claims were approved under the Obama administration for full forgiveness. Since Betsy DeVos took over at the Department, only about 16,000 claims have been approved, and only about 7% of those approvals have been for full loan forgiveness (the remaining approvals have only provided partial forgiveness).
Consumer advocates have spoken out against the Department’s current handling of borrower defense relief claims. For example, the director of the Project on Predatory Lending at Harvard Law School emphasized that, in order for the program to function, it must be implemented. We will need to wait and see how the Department of Education continues to handle claims, and whether borrowers receive the type of relief they deserve.
Contact an Oak Park Consumer Protection Lawyer
If you are having difficulty repaying loans, or if you have been defrauded, it is important to learn more about options that may be available to you. Under the Fair Debt Collection Practices Act, student loan borrowers are protected from unscrupulous debt collection practices. In some cases, student loan borrowers may even be eligible to file for bankruptcy to seek a discharge of their student loans. A consumer protection attorney in Oak Park can help. Contact the Emerson Law Firm to learn more about the services we provide.
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