Man there are great journalists out there and Shahien Nasiripour has been crushing it in the student loan segment.
Shahien is reporting that the Department of Education has been trying to collect on student loans it promised to forgive under the Borrower Defense to Repayment strategy. Under this approach, students with federal student loan debt would not only have the federal student loans forgiven but also be refunded for all the student loan payments they had made. This program is designed for students who had be defrauded by their school.
This article is focused on students who attended one of the Corinthian Colleges schools but it is indicative of a bureaucracy where a clear process is just plain broken.
Bloomberg is reporting, “Even though the Obama administration presumes Corinthian misled these borrowers, as many as 80,000 of them are in default and battling draconian collection efforts—wage garnishments, the seizure of tax refunds and federal benefits—on behalf of the Education and Treasury departments. Others are paying off debt they aren’t aware they don’t owe.”
But the article mentions problems with the student loan forgiveness and collection process that I’ve heard from others as recently as yesterday.
“Even when borrowers do apply for relief, they face the prospect of what appear to be baseless rejections. Education Department employees have erroneously told some borrowers there’s no federal right to debt cancellations. (The department issued an apology.) Some borrowers say they never hear anything at all. “To this day I have heard nothing,” said Ann Bowers, 56, of Paris, Tenn. Bowers, a former Corinthian student who served on a government advisory committee grappling with student debt, applied for debt relief herself nine months ago.”
One person told me yesterday they finally heard back on their Borrower Defense claim and the response was “we see no record of your claim.” Imagine waiting 6-9 months to only hear your paperwork has been lost.
Under the Borrower Defense program the Department of Education says it will cease collection activity for claims that have been submitted but as the article shows, that’s not happening for all claimants. Julio Gonzalez was getting collection calls every few minutes, he says. “Although the Education Department states on its website that it will cease collection efforts on Corinthian borrowers’ disputed debt, experiences like Gonzalez’s are common. There may simply be too much money at stake.”
Shahien knocked this investigation out of the park. I urge you to read the rest of the article, here.
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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.
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