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This is great news!!  Many of us have been complaining about the Accrediting Council for Independent Colleges and Schools (“ACICS”) for the past year.  This is the accreditor for both Corinthian and ITT.  Both Corinthian and ITT were accredited up until the very day they filed bankruptcy.  What does that say about our for-profit accreditation process?

As CNN Money reported today, the fed pulled the plug on them finally.  I only wish this had happened years earlier, the signs were certainly there.

“For far too long, this delinquent and derelict accreditor has rubber stamped the flow of federal dollars to colleges and universities that engaged in widespread fraud and abuse,” said Democrat Senator Richard Blumenthal in a statement.

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Earlier this week I wrote about the transparency of costs of education and how private for-profit institutions are likely going to have to change their marketing to comply with stricter oversight by the CFPB and the accreditation agency for these for-profit private schools, ACICS.

Well today I received an emailed thank you for the “transparency and communication” when I took the time to explain the various options for a client regarding the differences of rehabilitation and consolidation and which payment plans apply and why.  She made the decision that her credit was more important under one option than a slightly lower payment and reduced payment duration under another.  But she had her reasons and fully understood the options once I explained them.  Many people wouldn’t have had the opportunity to have this discourse, they wouldn’t even know there was a choice because the present student loan system is so anti-transparent.  

While the government websites are good in telling you what payment plans are available presently, they are not good in explaining the differences between them so you can make an informed and wise decision that will impact 10-25 years of your life, nor the different ways to cure a default (with the advantages or disadvantages of each) or even mention that you can change your loan type for different results.

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We’ve been getting very interested lately in how schools, particularly for-profit schools, are representing the cost of education at their institutions.  At ITT for instance, we’re learning that students were for the most part simply left in the dark about what their education would cost.  By the time they learned the true cost, it was too late and they were already committed.  They were also told that any shortfall in tuition that was not covered by federal financial aid would be covered by “temporary credits”.  Some of our clients are reporting to us that they didn’t know these were actually loans.  Others were aware they were loans but were told they were 0% loans.  Then nine months later, ITT demanded payment in full of the amount representing the “temporary credits”.  When most student couldn’t pay all at once (95% or more most likely) they were provided with a private loan at 13-16% with a 10% origination fee.  That’s 23-26% interest folks!!  None of this was fully explained up front.  This will be the basis for one of our claims in our Defense to Repayment cases.

Also this week the CFPB enforced an order whereby institutional student loans held by a western school were discharged and refunds ordered when a college misrepresented the low payment plans.  Apparently they promised $25 payment plans or something to that effect.  I haven’t had time to find and review the allegations behind the Order.

Today in the ABA Journal, I read that the University of Tulsa College of Law is reducing its tuition by 35%.  They state that the reduction is to bereally transparent about the cost of legal education.”  Interesting.  Transparency.  Were they less than transparent last year?  Now I haven’t been following the University of Tulsa since my law practice is in Florida, either they are ahead of the curve and we can expect more of the same from other schools who want to avoid scrutiny or perhaps they are already under scrutiny.

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I don’t think we have any Florida clients from these schools, but I hope this is a sign of what we can expect going forward for other for-profit schools (read ITT and IADT among others here) that misrepresent the costs of education.  Funny, I am evaluating this issue right now against ITT in order to raise this as one of MANY allegations of state law violations in a Defense for Repayment for federal loans under the new regs out on November 1, 2016.  ITT allegedly had this little trick where they would issue Temporary Credits to cover tuition gaps at zero percent interest, but fail to tell its students that they had to be repaid in nine months with very expensive private student loans at 13-16% interest plus a 10% origination fee.  This data comes from a CFPB complaint that is pending before a federal court now.  Then when students couldn’t come with the money, they would be threatened with expulsion unless they agreed to these high interest, high cost private loans.

Anyway, here the results posted by the CFPB today!  In this case, the CFBP found that Bridgepoint convinced students to take out private loans by falsely assuring them that the loans could be paid back with a lower repayment amount than was possible.

Today the CFPB ordered Bridgepoint Education Inc. (owner of Ashford University and University of the Rockies) to discharge all its outstanding institutional loans to students and refund loan payments already made, based on findings that the school misrepresented the cost of the loans to students.  Total student relief will be about $23.5 million, and there are also injunctive-type terms and an $8 million penalty.  Below is NCLC’s press release.

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I read a review a student loan client wrote about me last night and it presented a theme that I have witnessed over and over.  Have you ever been told that you have no options when it comes to dealing with your student loans?  If so, please keep reading.

Here is the Avvo review:  I came to Christie and her team after battling by student loan companies for 8 years. Every other attorney I spoke with wrote me off and when i tried to work directly with the loan company a “supervisor” literally laughed at me. Christie not only offered to help, but she won!!!

Had this client gave up after he talked to the first, second or even third attorney, or after having been laughed at by the loan company’s supervisor, he would still be nowhere.

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Ok, I have a bone to pick with Great Lakes.  I formerly considered them one of the better student loan servicers out there.  Not any more.  On their website they offer free help and tell people not to pay a fee for student loan help that is free.  It’s spelled out in a big bright banner.  Well that sounds great, if they’d actually help.

Case in point.  A couple in their early 60s came to see me last week.  They were paying $1,400 for Parent Plus loans the wife took out to help her daughter who has been unable to find a job.  They can barely afford the $1,400 and won’t be able to afford it much longer.  The wife helps out in the husband’s business and does not earn a paycheck.  The husband draws Social Security and owns a small business.  They didn’t know how much they owed, so they called Great Lakes while in my office and found out it was $72,000.  But despite being able to easily reach their student loan servicer, they were not given any advice as to how to lower their payments.  NADA, ZILCH.

I knew immediately exactly how to help them lower their payment to zero.  It took me 15 minutes of listening and asking questions.  I told them how I can drop their payment in 1-2 months.  And we can even get a forbearance for the two months if needed.  For this particular case, we will consolidate their Parent Plus loans to Direct Loans and apply for the Income Contingent Repayment (ICR) plan right AFTER they file their tax return in Oct (they had obtained an extension already) as married filing separately.  And presto, zero payment.  That’s right ZERO.  Did Great Lakes tell them any of this?  NO.

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christie_d._arkovich_p.a_1_smallThe DOE is involved in a negotiated rule making process right now to expand its relief of federal student loans for misrepresentations or fraud regarding recruiting practices, marketing, and job placement at potentially fraudulent schools which may be subsequently closed or are under investigation.  The DOE website briefly covers this new process called Defense to Repayment here.  This the result of several Attorney Generals appealing to the DOE to do something following the Corinthian bankruptcy (including Everest) for students who do not fit the traditional closed school discharge (must have attended with 120 days of closure and non-transferrable credits).  Virtually none of our clients fit that definition.  While some the information for the application will likely be rudimentary such as name of school, degree, transcripts, dates of attendance and so forth, in order for a successful discharge, additional information is anticipated such as:

Any details about the conduct of the school that the borrower believes violated state law including, but not limited to:

  • The state and applicable law or cause of action (if available)
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Do you know what it means to rehabilitate federal student loans and why it is necessary?  First, once a federal student loan goes into default, several consequences can occur including:

  • Administrative wage garnishment;
  • Income tax refund intercepts;
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ittOn August 26, 2016, the U.S. Department of Education banned ITT Technical Institute from enrolling new students who use federal financial aid.  This is the result of several investigations into their recruiting, marketing and job placement practices.  The loss of these funds may ultimately be the demise of ITT likely in a matter of weeks.  The Chicago Tribune did a story here with more details.

9/19/16 Update:  Since ITT’s closure on September 7, 2016, we are now taking clients for representation to seek a discharge of their federal student loans (including Parent Plus federal loans taken by a parent for a student).  New federal guidelines created following the closure of Corinthian go into effect on November 1, 2016 to allow for former students to potentially discharge debt due to fraudulent representations by the school in violation of state law.

It is too early to say whether former students of ITT will be able to assert a defense to repayment of their federal student loans.  It’s possible because there are several open investigations into various ITT campuses and if they find evidence of fraud or illegal behavior, you may be eligible for relief.  The DOE is expected to wrap up its final regulations regarding borrower defenses to repayment of federal student loans by the end of this year.  We believe that the new regulations will expand the current environment which mostly only permit an administrative discharge when a school is closed within 120 days of your attendance and your credits are non-transferable.

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stickyI just watched yet another attorney’s video from 2013 about how student loans are hardly ever discharged in a bankruptcy unless you are extremely ill.  The ending quote about student loans was “you’re stuck with them”.

And that was it.  No discussion about options, possible outcomes, etc.  Just you’re stuck with them.  Unfortunately that is still the outlook of most attorneys.  I guess that’s good news for my student loan practice, but we can only serve so many clients.  What about all the ones we don’t reach?

We don’t accept that.  At our law firm we are finding solutions.  This week one of our private student loan clients accepted a settlement that was only 8% of his nearly 100k balance.  8 percent.  Really.  And he’s young, perfectly healthy, with no disability.  He is borrowing $8,000 from his father to pay off in full this ridiculously huge student loan that he could never make a dent in otherwise.  Then we are putting him into an income driven plan with debt forgiveness for his much smaller federal loans.  I think his payment will be around $250.  He came to me with $140,000 in debt with an income of less than $35,000.  His student loan statement from Navient showed he was $69k past due.  Most attorneys including the one from the video I watched today would say tough luck, you’re stuck with them.  Needless to say it was quite depressing watching this video.  I’m glad this client didn’t see that video, he probably would never have picked up the phone to call me.  Instead he now owes around 40k instead of $140k and he has a reasonable payment of $250 with debt forgiveness for anything not paid after 25 years.  And he feels good about himself and where his life is headed now.

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