Reboot Your LifeTampa Student Loan and Bankruptcy Attorney Blog

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.

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.

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;

On 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.