Student Debt Crisis Your One Stop Hub For Student Debt Issues Sat, 11 Apr 2015 19:53:04 +0000 en-US hourly 1 New York City Consumer Agency Investigating Four For-Profit Colleges Sat, 11 Apr 2015 19:53:04 +0000 The New York City Department of Consumer Affairs has begun an investigation into four for-profit collegesover concerns about students’ dropout and loan-default rates, and the ways in which students are recruited in the first place.

For-profit colleges have been under increased scrutiny at all levels of government in recent years, amid growing concern that many of their students are left shouldering unwieldy debt but unable to find good jobs, and that tax payers are being debited in the process.

“What we are concerned about,” said Julie Menin, the commissioner of consumer affairs, speaking about problems within the industry at large, “is that predatory, for-profit colleges are taking advantage of the ambition that so many New Yorkers with low incomes have for a better life, and cheating them out of their dreams and their money.”

The department issued subpoenas in February to Berkeley College, Mandl School, New York Career Institute and Technical Career Institutes, also known as TCI College.

At TCI, more than 77 percent of the school’s revenue is derived from federal student aid, according to federal data. At Mandl, that percentage is about 80. For-profit colleges are prohibited by federal law from receiving more than 90 percent of their revenue from federal student aid.

Ms. Menin said the Consumer Affairs Department had received hundreds of complaints in recent years about for-profit colleges. Department representatives said the four schools were chosen because they have high rates of student loan default, for example, and because students have complained about their recruiting practices, like repeatedly making phone calls to people who request information online, and then pressuring them to commit themselves during their first visit to the campus.

Continue Reading at The New York Time…

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Inside the Historic Meeting Between Student Debt Strikers and Their Government Antagonists Thu, 09 Apr 2015 19:38:47 +0000 Just months after seemingly closing off their best route out of crushing debt, federal officials have now committed to working with a group of current and former Corinthian Colleges students who are protesting the now-bankrupt company’s conduct by refusing to repay their student loans.

The first-ever meeting between government officials and a rapidly growing group of students who are on strike from student loan payments did not produce any grand resolution to the conflict at hand. But Tuesday’s meeting did set the stage for some conciliation between the two sides, with Department of Education officials committing to another meeting in the next 30 days and providing a small but significant piece of clarity about how the students can go about pursuing a full discharge of the loans they took out to attend sham classes at for-profit Corinthian Colleges. Some surprise guests in the meeting also indicated that the Department of Education now finds itself under pressure from the White House to provide these students an offramp from their life-ruining debts.

In the hotel prior to the meeting, strikers and organizers expressed a mix of nerves, anger, and excitement. Strike organizer Ann Larson praised the Consumer Financial Protection Bureau’s decision “to make sure that the Department of Education has to look these students in the eye and explain to them why they’re left with unpayable debt for attending a fraudulent college.”

In addition to the chance to tell Department of Education officials their stories, the meeting calls attention to a strange deficiency with the government’s system for redressing grievances like these for indebted college students. Student loan debts arealmost impossible to get rid of – they cannot be discharged in bankruptcy court, and the government will come after your Social Security check or your survivors should you still owe on loans in old age or after death – but there is supposed to be an emergency release valve for students who were wronged by their schools.

That valve has a firm basis in federal law — the Higher Education Act mandates a system for erasing debts if students can prove their school lied to them or broke state laws — and a lawyerly-sounding name (“defense to repayment”). But it doesn’t seem to have any real rules or procedures. When strikers went looking for a form to fill out to apply for defense to repayment, they found none.

“We had to do their job for them because there was no dispute form that was set up,” strike organizer Laura Hanna told ThinkProgress. “We had to create artisanal forms for that. ‘Here, here’s an example of what you could use,’ based on working with different lawyers and constructing something that made sense.” Officials told Hanna that they were not sure how many successful defense to repayment filings there have been in Department history, and promised to find out and have more information for the strikers soon.

The group handed a box of 257 defense to repayment forms to Undersecretary Ted Mitchell, who accepted them and gave the strikers a mailing address in San Francisco where future petitions could be sent. They had not been able to get even that basic level of procedural detail from the Department prior to Tuesday, and it was one small form of progress to come out of the meeting.

“The Department appreciates the opportunity to hear from representatives of the Debt Collective,” spokeswoman Denise Horn said in a statement following the meeting. Horn defended the Department’s handling of Corinthian in recent months, pointing out improvements it has been promised by the company that bought half of Corinthian’s schools, and pledged that “we will review every claim to borrower’s defense and continue to investigate Corinthian to help students as much as possible.”

Continue Reading at Think Progress…

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If You Work at Starbucks, You Can Now Go to College for Free Thu, 09 Apr 2015 19:35:46 +0000 Starbucks really wants its baristas to have a shot at a college diploma.

The coffee company just announced that it is expanding its tuition reimbursement plan to cover the cost of four years of college instead of just the two years it began covering last summer.

People who work full- or even part-time in the company’s U.S. stores can now earn a bachelor’s degree, from start to finish, online and free of charge through Starbucks’ partnership with Arizona State University.

“I’d definitely be interested in it,” said Renita, a 23-year-old barista at a downtown Washington, D.C. store.

The program will let people who work at least 20 hours per week at company-owned stores choose from 49 different degree programs through ASU.

Managers at several other locations would not permit employees to discuss the announcement and referred questions back to corporate, but youth advocacy groups immediately hailed the decision.

“The coffee giant is giving a jolt of hope for tens of thousands of working students across the country who can’t afford college on their own and deserve a shot at the American dream,” Sarah Lovenheim, spokeswoman for the group Young Invincibles, wrote in an email to Fusion. “If more companies follow Starbucks’ lead, we could see fewer student loan borrowers and a brighter economic future for tomorrow’s young adults.”

That’s a big “if,” however. While it’s certainly not uncommon for companies to help employees out with getting their degrees, it’s usually for a master’s, and those businesses generally require a years-long commitment to the company after graduation.

Starbucks won’t demand any such loyalty. Nearly 2,000 employees have already taken advantage of the company’s two-year tuition reimbursement, and Starbucks hopes to increase that number to 25,000 by 2025.

Read the Entire Story at Fusion…

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The Student Debt Revolt Might Just Work Mon, 06 Apr 2015 19:33:22 +0000 It started out as a few people refusing to repay student loans in protest of alleged predatory lending by for-profit Corinthian Colleges. But the “debt strike” has turned into a movement of over 100 students who may now have a real chance of getting the government to forgive their loans.

On Tuesday, the strikers met with senior officials from the Consumer Financial Protection Bureau, Education Department and Treasury Department to discuss having their loans discharged under a federal statute to protect college students from fraud.

The strikers are among 400 former Corinthian students to have filed what’s known as defense to repayment claims, an appeal to the Education Department to forgive their federal loans on the grounds that Corinthian broke the law. The department has broad authority to cancel loans when colleges close or commit fraud against students.

“What these Corinthian students have experienced is troubling,” said Denise Horn, a spokeswoman for the Education Department. “We will review every claim to borrower’s defense and continue to investigate Corinthian to help students as much as possible.” Horn said she could not provide a timeline for the review.

Corinthian, which until recently ran Everest Institute, Wyotech and Heald College, has become the poster child for the worst practices in the for-profit education sector. Problems at the California-based company came to light four years ago in a Government Accountability Office report that identified Corinthian as one of 15 for-profit colleges where recruiters encouraged students to commit fraud on financial aid applications.

Evidence of misconduct at Corinthian continued to surface through litigation and state probes. Yet the government continued to provide $1.4 billion in financial aid to the company every year as tens of thousands of students enrolled in programs that often required them to take on five-figure debt.

An ongoing CFPB lawsuit against Corinthian accused the company of steering students into private loans, known as “Genesis loans,” that had interest rates as high as 15 percent. The agency said that Corinthian set its tuition and fees for bachelor’s degrees at $60,000 to $75,000 to force students to borrow from the program and that company then received a slice of the lender’s fees…

Read the Entire Article at The Washington Post…

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A Little-Known Student Loan Protection Remains Mired In Mystery Mon, 06 Apr 2015 19:24:56 +0000 They were searching for a way to help thousands of students nationwide who had been mired in debt by predatory for-profit colleges. And a group of Democratic senators found the solution buried deep in a federal promissory note signed by every student who takes out government loans: the “defense to repayment” provision, a little-known clause that has become a rallying point for lawmakers and activists in the wake of the shutdown of the for-profit giant Corinthian Colleges.

The defense to repayment clause, they say, obligates the federal government to forgive the federal loans of tens of thousands of former students at Corinthian’s Everest College chain, which has been accused of a litany of abuses, and potentially at other colleges that have broken state laws.

“Of course there’s always secret passageways and back doors, but they’re usually not within federal law,” said Toby Merrill, the director of the Project on Predatory Student Lending at Harvard Law School’s Legal Services Center. “It was really surprising that this exists.”

Earlier this week, hundreds of former Corinthian students, with the help of a group of activists, submitted defense to repayment claims to the Education Department. The department played a central role in Corinthian’s exit from the for-profit college world, essentially forcing it to sell off or close its campuses amid a storm of complaints, lawsuits, and investigations into the company’s Everest College chain.

Though state lawsuits seek debt relief for students, Corinthian, Everest’s parent company, is essentially bankrupt. With little to no cash on hand, it is operating on a lifeline from the federal government as it tries to find somebody to buy the last of its schools. Even if the states win their lawsuits, there’s nowhere near enough money left in the company to pay back Everest’s former students, who have somewhere around $1 billion in outstanding loan debt. The only relief is loan forgiveness from the federal government — meaning…

Continue Reading at BuzzFeed…

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Stanford just made tuition free for families earning less than $125,000 per year Mon, 06 Apr 2015 19:21:01 +0000 If a student’s parents make less than $125,000 per year, and if they have assets of less than $300,000, excluding retirement accounts, the parents won’t be expected to pay anything toward their children’s Stanford tuition. Families with incomes lower than $65,000 won’t have to contribute to room and board, either.

Students themselves will have to pay up to $5,000 each year from summer earnings, savings, and part-time work. There’s no rule that parents can’t cover their students’ required contribution.

Stanford is much more generous toward middle-class and upper-middle-class students than the federal government is. Most students who get subsidized loans and federal Pell Grants come from families making less than $60,000 per year. But it also enrolls an outsize proportion of wealthy students. In 2010, the university’s director of financial aid said the median family income at Stanford was around $125,000.

On the other hand, only 14 percent of entering freshmen got federal Pell Grants in 2012, which typically go to students from families making less than $50,000 per year. Nationally, 41 percent of undergrads received Pell Grants.

Continue Reading at Vox…

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SDC’s Statement on Senator Elizabeth Warren’s Reintroduction of Bank on Students Emergency Loan Refinancing Act Wed, 18 Mar 2015 20:00:49 +0000 FOR IMMEDIATE RELEASE
March 18, 2015
CONTACT: Natalia Abrams
310-365-1069 –

Student Debt Crisis’ Statement on Senator Elizabeth Warren’s Reintroduction of Bank on Students Emergency Loan Refinancing Act

Today, Senator Elizabeth Warren re-introduced the Bank on Student Refinancing Act. It’s simple, really: Americans can refinance their home loans and car loans, so it’s only right that student loan borrowers be able to do the same. Currently, student loan borrowers are not able to refinance under most programs. Senator Warren’s bill would give over 25 million Americans the option to refinance and make their student loans more affordable.

Last week President Obama introduced the Student Aid Bill of Rights. The President’s proposal states that every borrower is entitled to an affordable repayment program – the ability to refinance student loans is a part of affordable repayment options. Over 55,000 people have signed Student Debt Crisis’ petition – Support the Bill of Rights for Student Loan Borrowers. They have made it clear that Americans want their legislators to create solutions. Senator Warren’s announcement today is exactly the response we hoped to see from our legislators and we look forward to more action from Congress to secure rights for ALL student loan borrowers.

“We are pleased and encouraged by the re-introduction of Senator Elizabeth Warren’s bill: Bank on Students Emergency Loan Refinancing Act. The ability to refinance federal and private student loans at current rates should be a basic right extended to student loan borrowers. There is no reason that you can refinance your home, your car, and other forms of consumer debt, but not your student loans.”  – Natalia Abrams, Executive Director

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Cradle to grave: Student debt now bankrupting seniors Wed, 18 Mar 2015 17:18:24 +0000 As if aging in America isn’t hard enough these days, a new government report has uncovered that seniors are facing yet another barrier to a secure retirement: their student debt. Once thought to be a young person’s issue, new data released by the Government Accountability Office shows that older Americans are also finding themselves buried under the weight of their student loans. The data helps paint a much larger picture of the overall economic insecuritythat too many of our country’s seniors face every day.

According to a recent story based on the report, a record number of borrowers are seeing their Social Security payments garnished because their federal student loans are in default. As the story explains, “More than half, or 54 percent, of federal student loans held by borrowers at least 75 years old are in default, according to the federal watchdog. About 27 percent of loans held by borrowers aged 65 to 74 are in default. Among borrowers aged 50 to 64, 19 percent of their loans are in default. The Education Department generally defines a default as being at least 360 days past due.”

The price of an education is quickly becoming too heavy a burden for far too many people, and it’s a burden that’s staying with them forever. College debt looms large as the most difficult debt to get rid of, and these numbers paint a startling picture of exactly how big a toll it’s taking on people as they age. For many, student debt is following them from the cradle to the grave – they’re condemned to a lifetime of payments that stagnant wages and mounting economic insecurity make it nearly impossible to manage.

What’s even scarier is that the health and retirement security of our friends and neighbors was, in many ways, already in jeopardy. In fact, the very idea of retiring has increasingly become a pipe dream for most workers. People are working until they die just to get access to health insurance and because they don’t have enough saved in retirement. If they ever do stop working, too many are living in fear that debt collectors will come garnish their Social Security payments. Student loan debt is just the latest in a long line of threats to the financial well-being of seniors.

And the problem is only going to get worse. Every eight seconds, someone turns 65 in this country. But as is true for the student-debt crisis, our country has no comprehensive plan to support our aging parents and grandparents and only a very fragmented, fragile system…

Continue Reading at the Hill…

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Sallie Mae Is the Poster Child for the Student Loan Crisis Wed, 18 Mar 2015 17:05:28 +0000 NEW YORK (MainStreet) — Liberals and Conservatives, inside the Beltway and out, disagree on immigration, monetary policy, the Affordable Care Act and a host of foreign policy issues. But when it comes to student loans, particularly the private lender Sallie Maenow Navient — they are very often of one mind. Navient, a publicly-traded company established with government money has been portrayed by the Left and Right as a blight on its customers and taxpayers.


The Right wing Reason Foundation, funded in part by what are known as the Koch Family Foundations, run by David Koch and his older brother Charles, published “Sallie Mae and Uncle Sam: Cronyism in Higher Education Finance” in July 2013, a scathing critique of Sallie Mae. Last February Kenric Ward posted a similar article on the Libertarian, complete with his support for Massachusetts Democratic Senator Elizabeth Warren’s opposition to Sallie Mae.


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You Can’t Discharge Your Student Loans In Bankruptcy Because Of Panicked 1970s Legislation Wed, 18 Mar 2015 16:56:32 +0000 Although bankruptcy should only be viewed as the last option for consumers drowning in a sea of debt, even this final-straw course of action won’t help Americans with getting out from under hefty student loans — but it wasn’t always this way.

Students being crushed under the weight of mounting student loan debt havefew options when it comes to receiving forgiveness for their debts, and bankruptcy is often the least obtainable.

Other debts, including your mortgage and auto loans, are dischargeable through bankruptcy filings, but student loans can only be discharged if the borrower proves “undue hardship” through a court determination.

And that process is surprisingly arbitrary, according to the National Consumer Law Center.

It is entirely up to the court to decide whether a borrower meets the standard, and the standard can vary a great deal, because the bankruptcy code does not provide an actual definition of undue hardship.

But for the sake of an example, the NCLC provides this scenario in which a court might decide that student loan discharge is necessary:

However, even under this circumstance, discharge isn’t a foregone conclusion.

While the process to discharge student loan debt in bankruptcy is long and tedious it wasn’t always that way.

Prior to 1976, student loans weren’t protected from bankruptcy proceedings. But that year, amid concern over high default rates, Congress passed legislation intended to safeguard federal investments.

The first version of the law put a ban on bankruptcy discharges for the first five years after a federal student loan was originated. It did include an undue hardship allowance that could discharge the debt earlier.

Two years later, lawmakers proposed a bill that would have returned bankruptcy rights to student loan borrowers. However, that legislation failed, and discharging federal loans through bankruptcy continued to be prohibited during the first five years after loan origination.

The law changed again in 1990, when the five-year rule was extended to seven years. In 1998, the law was revised again to remove any timeframe for allowable discharges, leaving undue hardship as the only way out.

At the time, this only applied to federal student loans. That changed in 2005, when lawmakers included private student loand debt in a comprehensive bankruptcy amendment [PDF].

Consumer advocates, like those at the NCLC, claim there was little need to pass legislation granting this non-dischargeable status to student loans…

Continue Reading at Consumerist…

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