Defense to Repayment of Federal Student Loans – Finally Relief Expected Soon for Students of Closed Schools

The 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)
• Specific acts (including failures to act) of alleged misconduct by the school
• How the alleged misconduct affected the borrower’s decision to attend the school and take out a loan to pay to attend the school
• The injury suffered by the borrower as a result of the school’s alleged misconduct
• Any other supporting information that would help the U.S. Department of Education review the borrower’s claim.

With debt ranging from $20,000 – $100,000, we recommend student loan borrowers hire competent legal counsel to help phrase the application correctly and provide sufficient evidence.  Attorneys will best know the state or federal causes of action that relate such as the Florida Deceptive and Unfair Trade Practices Act, intentional or negligent misrepresentation, state law fraud, the differences in accreditation and other legal references.  Attorneys can supplement affidavits from other students to help prove the representations that differed from the glossy brochures.  You’ll likely have one chance to do this right, don’t blow it.

We are gearing up now for the new regs expected out at the end of this year.  To get on our email list for updates or further information, please contact us at Arkovich Law  You might also want to check out prior blogs, or reviews or our Student Loan Survival Center.  The DOE is in a holding pattern right now with all applications on hold pending the new regs.  We are also waiting to file as we want to know exactly what the new regs say before we file.  Also this is only for federal loans, please contact us if you need assistance with private loans now.