Attending college is an opportunity to obtain education to chase the dream of an aspirational career with more income and satisfaction than could be obtained without a degree. And, colleges sell that dream. All colleges, public and private alike, engage in activities to recruit students to attend their college, pay their tuition, and in turn, support their institution. Colleges have whole positions and often offices dedicated to the recruitment of new students. Private, non-profit institutions, in particular, are known for their aggressive recruiting tactics including a seemingly endless barrage of phone calls.
But what happens when you buy-in, but the dream of a college education that you are sold turns out to be a lemon? Sometimes, private schools, like businesses, can no longer sustain the cost of operations. Typically, when this happens, the schools (or chain of schools) close down, are sold, and the company declares bankruptcy. The closure of the Corinthian Colleges, Inc. (“CCI”) chain of schools and many of the Art Institute Schools are just two recent examples. Closure is, of course, bad news for the schools and any investors but it is worse for the school’s students.
When a school closes, students are left with an unfinished education, sometimes with credits that won’t be accepted by other institutions. That’s bad. What’s worse is the accompanying student loan debt. Despite not being able to complete their degree or program at their chosen school through no fault of their own, the student is left holding student loan debt. The student’s options for relief from student loan debt depend on a number of factors including the type of loan(s), the school, and any intervening governmental action.
The recent closure of the CCI, the former owner and operator of the Everest Institute, Wyotech and Heald College, chain of schools provides a good example. In response to a lawsuit by the Consumer Financial Protection Bureau (“CFPB”), a judge found that CCI had engaged in deceptive and unfair practices in inducing students to enter into private loans through its Genesis program and in attempting to collect on those loans.
Because of the wrongdoing, the judge ordered CCI to pay $532 million in damages to students through the CFPB (You can read the full order here). With only $20 million in assets reported and having declared bankruptcy, there’s simply no way CCI will be able to pay the debt. Fortunately for students with Genesis loans, the company that bought a number of CCI’s campuses and the bulk of the Genesis portfolio of loans has agreed to absolve the student loan debt of thousands of CCI students.
Despite the write-off of many of the Genesis loans, many current and former CCI students with student loans still face problems — not all of the Genesis debt was written off, not all private loans were taken through the program, and the measure doesn’t help students with public loans. For both public and private loans, bankruptcy may offer relief under the right circumstances. For federal loans, students who were enrolled when their school closed or defrauded by CCI, may be eligible to have their federal debt discharged. Though, the government has not indicated how it intends to evaluate fraud claims, only that it is dedicated to helping CCI students.
The bottom line is that there are options for obtaining relief from student loan debt accrued in pursuit of a degree at an institution that closes, but understanding those options isn’t always easy. If you’re saddled with student loan debt from an institution, like Everest College, that has closed or been sold, and would like to discuss your options, contact the Jacksonville Student loan lawyers at Adam Law Group to learn more.