Student Loan Related

What a Mess. Department of Education and Court Create Corinthian Colleges Purgatory of Fraud

Written by Steve Rhode

The U.S. Department of Education reversed the Obama era policy of granting total federal student loan forgiveness for those who had been defrauded by their colleges.

The move by Secretary of Education Devos made no sense even when they pushed their new partial forgiveness program by saying Improved Borrower Defense Discharge Process Will Aid Defrauded Borrowers, Protect Taxpayers.

The proposed new partial forgiveness program was not based on the harm caused by the bad acts, fraud, and organized misrepresentation alleged by the school. Instead, loan forgiveness will be based on the students level of income based on their fellow students, regardless if they are working in a field that is related to their education.

The position of the Department of education after eliminating total loan forgiveness was “Relief from fraud will be dependent on the current earnings of the victims. Victims earning 70% and above of the income of their peers will only receive a 30 percent forgiveness of the fraudulent student loans. So to be clear, that income test is against the other students who were the victims of the same fraud and not the general population.” – Source

But in the class action lawsuit filed against the U.S. Department of Education the U.S. Magistrate Judge Sallie Kim said her hands were tied.

Judge Kim ordered the government to stop collecting on the debts owed by Corinthian Colleges’ students who had filed Borrower Defense to Repayment claims.

While that sounds like a win, the balances owed by those student loan debtors will continue to build interest and penalties that can harm the credit standing of those individuals.

According to Courthouse News, “Kim acknowledged that borrowers will still suffer harm to their credit and interest growing on their loans, even though she has ordered the government to stop collecting.

“I haven’t frozen all the harm, but I’ve frozen as much as I can,” she said.”

READ  Department of Education Punts on Borrower Defense to Repayment Rules

“Kim said she would alter the injunction to make clear that the Education Department must stop collecting loan payments from all former Corinthian students who applied for debt relief, not just the four named plaintiffs in the case.”

The current status just leaves defrauded student loan debtors without a solution and still owing the debt that is growing but won’t be collected on.

I was wrong, it was apparently possible to make this entire situation worse.

About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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