I was poached by Sallie Mae (predatory lending) through ITT before they got caught. I have 15k in private student loans through Navient now. I didn’t finish school because I found out the degree they offered was not worth the paper it was written on.
I want to stop paying on this loan that has haunted me for almost 20 years. However, I am active duty military with a security clearance. The loan originated in Michigan, but I am now a resident of North Carolina. Can I lose my clearance, or can they send a letter of indebtedness to my command?
Under the heading of Life is Not Fair, while it was determined the loans were based on fraud and the government forgave all federal ITT student loans, they have no such power over private lenders. Therefore, private loans were not forgiven.
A security clearance is a significant consideration before doing anything. Sometimes things like filing bankruptcy are better for a security clearance than sinking further in debt. But your situation is different.
In your case, it sounds like you are making the loan payments, but it feels grossly unfair considering the school turned out to be a scam. But, again, your impressions were spot on. The degree probably isn’t worth the paper it is printed on.
You have a valid position to present to those you’d have to answer to if you defaulted. Basically, you are caught in a trap, being forced to repay loans for fraudulent actions of others.
The flip side of this issue is that a security clearance process sometimes involves people making commonsense decisions, but not always.
I once had a client that was the person responsible for approving the security clearances, so he stopped making payments but suffered no consequences.
You are probably in a great position to go to your Defense Industrial Security Clearance Office (DISCO) or Defense Security Service (DSS) contact and discuss this situation.
You can argue you are a victim of fraud and continue to be punished by making payments on the student loan.
In 2017 a class-action suit was filed that claimed ITT was engaged in “extensive, widespread, and systematic deceit.”
“ITT perpetrated these illegal actions pursuant to corporate policies and imperatives directed at churning students through a costly sham. ITT relentlessly pitched itself to students as a sound investment with a healthy return in the form of guaranteed or near-guaranteed entry-level employment in a lifelong career. In reality, ITT deliberately and severely underinvested in resources needed to deliver on these promises, leaving students with an expensive but valueless credential. Former ITT students have an easier time obtaining employment when they remove ITT from their resumes entirely.”
The case was settled before the court resolved it. It appears yet another situation where the creditor folded before a Court issued a final ruling.
There is a Way to Deal With This
There is clearly a way to deal with your Sallie Mae, now Navient, private student loans for ITT, and your security clearance. The question is if the system has become so automated that a human can’t decide.
If you do default on the Navient private student loan, it can be settled. Talk to Damon Day who has an extensive amount of experience in counseling people through this process.
You were a victim of fraud; the loan can be at least settled for far less than you owe, but a human needs to see the situation so you don’t wind up with an undeserved action for dealing with this.
Ironically, the security clearance process is designed to determine who might be at risk of bribery, inducement, or coercion from financial problems. Therefore, I think it could be logical that the continued repayment of these private student loans for fraudulent loans is a higher security risk.
But commonsense, and logic are not always part of a government process.
My advice is to keep making your payment but talk to your security clearance folks. Let them know you are a victim of well-documented fraud and a way to deal with this situation. However, you will have to default on the student loan payment for Navient to settle.
You might also want to consider talking to an attorney that specializes in military law issues and get a legal opinion. I did a search in North Carolina and found listings for Center for Military Law, Military Justice Center, Military Lawyers in North Carolina.