If you are wondering if you can sue for student loan debt forgiveness, you’re not alone. Thousands of students are suing the Department of Education over policies imposed by former Education secretary Betsy DeVos. A recent lawsuit argues that the department illegally directed many borrowers into long-term forbearances. Meanwhile, fraudulent companies are targeting borrowers with false claims of debt forgiveness. In this article, we’ll take a look at some of these issues.
A class-action lawsuit against former Education secretary Betsy DeVos
A new class-action lawsuit has emerged over the department’s policies aimed at promoting financial aid for college students. The lawsuit alleges that DeVos abused her authority by disbanding a department unit designed to help students who have defaulted on their student loans. DeVos was recently found in contempt of court and ordered to pay $100,000 to settle claims of wrongdoing by former students of a for-profit chain college. This lawsuit also accused DeVos of mishandling federal student loan payments.
The suit, filed in federal court in San Francisco, aims to force the department to review borrowers’ claims that had been pending for four years. The department has agreed to expedite the review process in the lawsuit, but nearly 95 percent of borrowers’ claims were rejected or were never approved. The majority of approved claims were dictated by precedents set before Ms. DeVos’s takeover of the department.
The Biden Administration had appealed Alsup’s ruling, claiming that heads of government agencies are not generally subject to depositions. In February 2021, the Biden Administration joined the suit on behalf of DeVos. The Biden administration’s decision to block DeVos’ deposition was also based on the defense that the government acted in bad faith by failing to process borrower defense claims, which allow students to receive federal loan forgiveness if they study at a school that violates state law.
Navient’s illegal and unethical practices in directing borrowers into long-term forbearances
The Massachusetts Attorney General, Josh Shapiro, led a lawsuit against Navient, one of the nation’s largest student loan companies. In a settlement, Navient will pay the states $95 million, with the rest going toward debt cancellation for certain private loan borrowers. The company has also agreed to reform loan-servicing practices.
In violation of the Consumer Protection Act, Navient improperly promoted its co-signer release feature on private loans. Nevertheless, the company put up barriers that prevented consumers from achieving the co-signer release and failed to disclose that fewer than 2% of borrowers obtained this option. This practice resulted in borrowers paying hundreds of dollars more a month than they were budgeting.
The settlement also includes conduct reforms. Navient must now fully explain the benefits of income-driven repayment plans, and estimate the payments borrowers would make under those plans. The company must also train customer service agents and other public employees to counsel customers on the benefits of income-driven repayment plans. The company is also prohibited from compensating customer service agents in a way that minimizes counseling time.
The Consumer Financial Protection Bureau found that Navient engaged in abusive practices and steered borrowers into long-term forbearations. These forbearances allowed borrowers to temporarily halt payments, but accumulated interest piled up and added to the loan principal. Borrowers could have avoided these illegal and unethical practices by pursuing an income-driven repayment plan.
Scammers targeting borrowers with false claims of debt forgiveness
Many scammers claim to be able to eliminate a student’s outstanding balance in as little as three to six months. But the truth is that these schemes don’t work that way. To qualify for debt forgiveness, you need to be employed in a particular field for years. Often, these scammers pose as government officials, loan servicers, or debt relief experts. Their slick sales letters promise instant forgiveness but then ask for upfront fees or recurring fees.
While these companies aren’t illegal, they can be highly fraudulent. Federal Trade Commission officials have listed phrases that borrowers should avoid, including the CARES Act forgiveness scam. Many of these companies claim to offer debt forgiveness in exchange for payment, but in reality, they are just taking your money. The Federal Trade Commission reported that scammers had already raked in nearly $95 million in illicit fees between May 2016 and June 2017.
The Federal Trade Commission, U.S. Attorney General, and the Consumer Financial Protection Bureau are actively pursuing scammers aimed at student loan borrowers. Legal services organizations and attorneys can help you navigate the maze of debt relief options. If you find yourself falling victim to a scam, it’s important to report it immediately. Don’t hesitate to file a complaint with the federal student aid office or FTC.