When most students graduate from college, they gain a lot of things: An education, new life experiences, and of course, debt.
Due to an obscure law, some of those who borrowed money may have a claim to have their loans forgiven.
“If you think of the nature of for-profit colleges, in order to attract students, they have to make pretty broad claims.” David Anthony of Bone McAllester Norton PLLC explained.
The law allows people to have their federal loans forgiven if they can prove that the school used illegal tactics to recruit them, such as promising a well-paying career that they can’t guarantee.
While this may have happened to numerous borrowers, it has to be proven in order to get your loans dismissed.
“Proving fraud is very difficult, because you have to show specific intent. ‘They said this statement with the intention to mislead.’” Anthony said.
In Novemeber of 2015, the Tennessee Office of the Attorney General worked with 38 other states and the District of Columbia to settle a claim against Education Management Corporation, which operates The Art Institute of Tennessee and Argosy University in Nashville.
In that settlement, the group of schools agreed to change their business practices, and 1,400 former Tennessee students were repaid more than $2 million in loans, but these new claims could command even more money.
According to the Wall Street Journal, more than 7,500 people have applied to have their loans expunged, totaling in $164 million in loans. That’s an average of more than $21,000 per student.
“If a lot of people take advantage of this program and a lot of people submit good claims, this could be expensive for the government.” Anthony explained.
After receiving the thousands of claims and realizing the law was vague, the Education Department has begun negotiations to set clear rules on what proof is needed to demonstrate a school committed fraud.
“My suggestion is, if you think you have a claim in this regard, make it now before they clarify the law.” Anthony suggested. “Right now the law being vague and ambiguous can help you.”
While many of the loans will not be forgiven, the streamlined use of this law could cost taxpayers millions of dollars.
Before more people appeal their student loans, the federal government wants to make it clear: The program is for people who have legitimate claims that their colleges lied or misled them.
The program is not intended to reimburse borrowers who simply are upset about their job prospects and regret taking the debt.