Student loan borrowers are appealing to the government to have their student loans forgiven under an obscure federal forgiveness program. Since 1994 the program has only been used successfully three out of five times. The law forgives borrowers’ debt who prove their schools used illegal tactics to recruit them, such as lying about their graduates’ earnings.
The forgiveness program was used successfully in a case last year where the U.S. Education Department agreed to cancel nearly $28 million in debt for 1,300 former students of Corinthian College. The college was also forced to pay $550 million to the Consumer Financial Protection Bureau and later liquidated in bankruptcy.
The Education Department is unsure what to expect due to the law’s vague explanation of what evidence is needed to prove a school has committed fraud. However, the 7,500 borrowers who applied to have their $164 million in student loan debt expunged believe the forgiveness program will be their lifeline.
The Education Department’s undersecretary, Ted Mitchell said, “The law is clear about giving students redress when they’ve been defrauded.” He went on to say this goes for forgiveness on current loans as well as potential reimbursement of repaid loans.
Education Department officials said the agency failed to draft rules for the law due to a lack in urgency to do so since they had only received five applications since 1994. The recent surge in applications reflects the growing savvy of student activists who discovered it last year.
The majority of the borrowers who have applied for the forgiveness program have attended for-profit colleges such as Corinthian College. Others have attended Art Institutes owned by Education Management Corp. and ITT Technical Institutes owned by ITT Educational Services Inc. The federal government has investigated all three of these institutions in recent years for illegal recruiting tactics.
For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.
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