Celebrating 10 years! 2007-2017

Question about student loans (Dept of Educ.)

I was contacted by a client who has a lot of student loan de cranky08/09/17
Borrower defense to repayment. Basically you have to be able onehell08/09/17
Thank you! This is valuable advice. I'll look into it. cranky08/10/17
I had this thought: If there's any piece of the school left soupcansham08/10/17
That's a very interesting idea, though I suspect Dept. of Ed onehell08/10/17
Oh yeah and also, if you asked for nominal damages to keep i onehell08/10/17
I agree, but I wonder if pursuing a real judgment wouldn't s soupcansham08/10/17
Thanks for the idea but the person's scammy school (ITT) alr cranky08/10/17
Eh, if the school did something fraudulent then dumb isn't t soupcansham08/11/17
Depending on your client's particular situation, you could o magellan08/10/17
I'll check it out. Thanks. cranky08/10/17
Good luck, Bro. Obama tried to ride these coat tails and cal magellan08/11/17
cranky (Aug 9, 2017 - 1:22 pm)

I was contacted by a client who has a lot of student loan debt from a now-defunct technical school. MOHELA is the administrator of the loan repayment. Client is paying a ton in interest and he didn't even get a degree from the school. He doesn't qualify for the "Closed school discharge" because he quit too long before the school was shut down. Is there any way out of paying the loan or is it possible to bargain with MOHELA to lower the interest amount and payments? I am not familiar with this type of debt so I am unsure if there's anything I can do for him. Clearly it's not like dealing with a credit card collection agency. Thanks if anyone has advice on this.

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onehell (Aug 9, 2017 - 6:36 pm)

Borrower defense to repayment. Basically you have to be able to show that the school did something that would be considered fraudulent under state law. Of course, that's easier to do if they were shut down by some AG or something. Otherwise gotta find some evidence, but worth a shot if you can dig something up and the debt is significant.

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/borrower-defense

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cranky (Aug 10, 2017 - 7:33 am)

Thank you! This is valuable advice. I'll look into it.

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soupcansham (Aug 10, 2017 - 10:26 am)

I had this thought: If there's any piece of the school left as a legal entity, would it be worth it to sue them for fraud in small claims or another local court for $1 in damages? It's likely they would fail to show up and then you'd get a default judgment for fraud against them.

I think with a judgment for fraud it'd be hard for the DOE to claim you weren't defrauded, and this might be an easy way to get such a judgment.

It's just a thought experiment, though.

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onehell (Aug 10, 2017 - 1:12 pm)

That's a very interesting idea, though I suspect Dept. of Ed knows what a default judgment is and would not regard it the same as a finding of fraud that was actually admitted to by the school or that was found to exist after an actual adversarial process.

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onehell (Aug 10, 2017 - 3:22 pm)

Oh yeah and also, if you asked for nominal damages to keep it in the jurisdiction of some small claims court, that too is something they would not ignore. If the damages awarded were only nominal, it would presumably impact the fact-finding requirement that the fraud must be connected to your federal student loan. If it were so connected, then the damages in a case where you were a named plaintiff would bear some relationship to your loan amount.

Again, still an interesting idea, but it might be a case of "too clever by half," and might even work against you, because they could say that the court found that your damages do not even approach the kind of forgiveness you are seeking and therefore the judgment is evidence against you, not evidence for you. I would say either get a real judgment, or stick to the purely administrative route. A small claims court default judgment for nominal damages could be worse than nothing.

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soupcansham (Aug 10, 2017 - 4:47 pm)

I agree, but I wonder if pursuing a real judgment wouldn't still be easier than dealing with a hostile DOE.

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cranky (Aug 10, 2017 - 8:31 pm)

Thanks for the idea but the person's scammy school (ITT) already went bankrupt so there's no point in suing the place. Plus the person has no extra money to sue. I provided the info that onehell kindly suggested. (Though part of me feels that if you're so dumb to take out a loan for such a "school," why should you get to escape the debt later when it turns out to have been a bad decision?)

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soupcansham (Aug 11, 2017 - 9:08 am)

Eh, if the school did something fraudulent then dumb isn't the deciding factor. Good luck for you and the client.

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magellan (Aug 10, 2017 - 12:41 pm)

Depending on your client's particular situation, you could offer him/her the option to discharge through "Nelnet." (TPD)

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cranky (Aug 10, 2017 - 8:31 pm)

I'll check it out. Thanks.

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magellan (Aug 11, 2017 - 3:26 pm)

Good luck, Bro. Obama tried to ride these coat tails and call it his loan deferment. It never was. It was always available on the down low. You can manipulate the terms to satisfy the client.

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