Very Interesting Article this Week about Certain For-Profit Schools Receiving Federal Loans Although They Were Not Actually Eligible!

Interesting times to be a student loan attorney.  Just this week, a key decision was issued by the Fifth Circuit in In re: Crocker, No. 18-20254 which discharged private student loans.  Why is this important?  Well, it’s the first published Circuit level case on this issue.  And the Court ruled against Navient!

Of course, you have to meet certain criteria to have a non-qualified student loan — the loans must have been outside or beyond the actual cost of education, or provided to an ineligible institution or ineligible student.

Which brings to mind, what is an ineligible institution?  Simple, one that was not eligible for federal funding.  Including a school which got federal aid under false pretenses.  Perhaps federal loans were provided to a for-profit school BEFORE they were actually eligible.  This opens a whole new batch of loans which may be discharged.

This Washington Post article “Trump administration let nearly $11 million in student aid go to unaccredited for-profit colleges“, links to numerous documents and a very concise letter from the Committee on Education and Labor.  Now I’m not going political on this.  The DOE let this happen.  And I bet it’s happened for other schools than those mentioned in this article which were Dream Center Art Institution locations in Colorado and Illinois.

How can this help you or our clients?  Well, normally when we see that a school received federal funding, this means it is an eligible institution and that defense/offense claim is no longer available to us.  But if the institution was not eligible to have received that aid, well then the legal argument is back on the table for us to assert the discharge of any private loans obtained to attend that school.  At a minimum.