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Recently I’ve been researching the student loan system and how things work in non-U.S. based medical schools.  Unbelievably there are three dozen island medical schools.  That’s a crazy high number, just how many islands are there in the Caribbean anyway?

Federal student loan aid is generally not available for these schools.  Although they are technically “accredited”, the accreditation itself is something unusual at best and regulated by the Islands themselves in large part.  And while the Department of Education recognizes ACCM (Accreditation Commission on Colleges of Medicine), many individual states do not.  So it’s a bit of buyer beware, there are success stories for those committing to the hard work to pass the various U.S. tests and are willing to limit their practice, internships, residencies and rotations to certain states, but there are also stories of high student loan debt with little to show for it.

So where does the bankruptcy relief come in?  Well for one, private student loans may be dischargeable in bankruptcy when the debt incurred is not for a qualified educational loan and/or an ineligible institution.  In a recent case, In re Decena, 549 B.R. 11 (Bankr. E.D. N.Y. 2016), debts owed on private loans, to attend a “for-profit” university, not accredited by the United States fell within the exception to discharge of § 523(a)(8).  We are looking to expand this ruling to Florida in a case we are planning on filing next month.

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Well the final regs are out now.  But they are 927 pages.  This is gonna take a while to read through — and looking at Halloween costumes on Facebook is winning out right now.

More to come later….

Happy Halloween everyone!!

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CDA oct 14 2016 ITT Action News
ABC Action News interviewed two of our clients who have attended ITT and IADT:

You can click on the ABC Action News above or type the above link into your browser.  https://www.facebook.com/tampabaynews/videos/10154553756350409/

These students attended ITT and IADT here in Tampa several years ago and have tons of federal student loan debt for degrees that are essentially worthless.  Starting Nov 1, 2016 there is a new program called Borrower Defense to Repayment that may offer them relief.  Provided we can show false representations were made concerning things like job placement rates, accreditation and cost of attendance and link those to state law violations, we may be able to obtain a full discharge of federal student loans.

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loan modWe received a nice loan mod today with a P&I payment of only $746.  For our bartender client that is great news and very affordable!  She had even had a loan mod previously but had lost her job and was unable to pay so Wells Fargo filed another foreclosure action after the last one was dismissed.  We then delayed the foreclosure and kept re-applying after a denial for a loan mod as her income and expenses fluctuated.  We never gave up.

This client had an FHA loan and there are a number of hoops an FHA loan mod has to undergo.    The first question our client was what her payment would likely be to determine whether it would be affordable or whether she should simply look elsewhere to live and let this house go.  A target payment is determined by three values for an FHA loan:

  1. 31% of gross income;
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surrenderFlorida has a history of being unusually lenient when it comes to debtor protections in bankruptcy.  For one, we’ve opted out of the federal exemptions and have our own.  The homestead protections are some of the best in the country.  In some ways Florida’s exemptions are good, in others they are outdated.  For instance if a debtor owns a home they are allowed only $1,000 in personal property exemptions (plus other retirement account and homestead exemptions etc).  A middle class family filing bankruptcy when they are overwhelmed with bills, have personal belongings that total more than $1,000 particularly when they own a home.  This amount is outdated and not reflective of the times.

A recent switcharoo regarding a debtor’s homestead has caught many debtors unaware.  For the past several years, many debtors’ attorneys advised their clients to waive their homestead rights and instead select an option on their Statement of Financial Affairs (“SOFA”) to “surrender” their home even though they continued to live there.  Some of those clients wanted to defend a pending foreclosure or obtain a loan modification.  Some ran into trouble years later and then wanted to defend a foreclosure.  Perhaps a client ran into a mortgage loan servicer with poor recording skills that failed to correctly apply their payments and had to defend a foreclosure that should never have taken place.  Selecting “surrender” on the SOFA can have long reaching consequences because it can forever bar a client from challenging a foreclosure even years after the fact due to a new interpretation of what the term “surrender” should mean.

On October 4, 2016, the Eleventh Circuit Court of Appeals ruled that chapter 7 debtors who file a statement of intention to surrender real property in bankruptcy cannot later contest a foreclosure action, and bankruptcy courts have broad power and authority to sanction violations.  Failla v. CitiBank, N.A., case no. 15-15626 (11th Cir. October 4, 2016).   While Failla is a Chapter 7 case, there is a strong probability it will be argued in a Chapter 13 as well.

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Were you aware that when you tell a bill collector (including a student loan collector) to stop calling your cell phone, they must do so immediately?  Well usually.  It depends upon the type of telephone system the collector is using.  If they are manually dialing the phone, then they can continue to call you.  The reason is simple:  there is a human being on the other side making a conscious decision to call you at a certain time and date seeking payment.

But what if it is a machine calling you?  The Telephone Consumer Protection Act (TCPA) states that calls using an auto dialer or an ATDS must stop if you ask them to stop.  The reason is clear here as well:  a machine is capable of calling hundreds of thousands of people incessantly following a pre-determined script or campaign.  It often seems that nothing can stop it.  So a law was enacted to help protect people from a barrage of calls and save valuable minutes on their cell phone plans.  I had a client just last week tell us that when she spoke with someone asking the calls to stop, she was told she was on an autodialer and the calls couldn’t be stopped.  Really.  Well that statement certainly made it into a Complaint we prepared for filing.

In the last couple years, the industry has attempted to change its equipment to get around the TCPA.  They say that this equipment is TCPA compliant.  The equipment uses some parts human and some parts machinery.  So how much human intervention is enough to allow for the calls to continue?   The industry has taken to using entire systems that as a whole appear to be an ATDS, but each component standing on its own may not independently be an ATDS.  What capacity must the equipment have in order to fall under the TCPA’s protections? The answer I’m afraid is less than certain.

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witch2
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 be “really 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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