Good news for defrauded for-profit school students

Monday, March 29, 2021

The U.S. Department of Education cancels $1 billion in student loan debt for defrauded borrowers, and University of Phoenix students get $50 million in settlement

In the same week, the Department of Education and the Federal Trade Commission (FTC) stood up to unscrupulous for-profit colleges on behalf of thousands of defrauded student loan borrowers. First, U.S. Education Secretary Miguel Cardona reversed a Trump-administration decision to provide only partial relief to scammed students. For-profit schools like Corinthian Colleges and ITT Technical were found guilty of violating federal law by misleading and encouraging students to take out student loans. The decision will help nearly 72,000 of those students receive $1 billion in federal loan cancellation. The Education Secretary explained that borrowers who have approved borrower defense claims but may have only been granted partial debt elimination during the last four years will be automatically eligible for full loan discharge.

Full relief under the new policy includes:

• 100% discharge of borrowers’ related federal student loans;
• Reimbursement of any amounts paid on the loans, where appropriate under the regulations;
• Requests to credit bureaus to remove any related negative credit reporting; and
• Reinstatement of federal student aid eligibility, if applicable.

If you were granted partial student loan discharge on your federal loans, you are now automatically eligible for full discharge. If you think you were defrauded by a for-profit school but have yet to submit your borrower defense to repayment claim, start here. If you’re not so sure about your eligibility, you can call the Department of Education’s borrower defense hotline weekdays, 8 a.m. to 8 p.m. Eastern time, at 855-279-6207.

University of Phoenix settlement

The FTC announced that former University of Phoenix students may receive payments as part of a $50 million settlement with the for-profit college for fraudulent marketing practices. University of Phoenix lured potential students into enrolling by giving the false impression that the school worked with large organizations like AT&T, Yahoo!, Microsoft, Twitter and the American Red Cross. The FTC alleged that University of Phoenix and its parent company, Apollo Education Group, specifically targeted prospective Hispanic and military servicemembers.

In addition to the nearly $50 million in direct payments to more than 147,000 students, the $191 million settlement includes $141 million to cancel unpaid balances owed directly to the school by eligible students.

To be eligible for a settlement, you must meet all of the following criteria:

• You were first enrolled in a master’s, bachelor’s or associate degree program at University of Phoenix between Oct. 15, 2012, and Dec. 31, 2016;
• You paid more than $5,000 in cash, grants, federal and private student loans, or military benefits;
• You did not get debt cancellation as part of the FTC's settlement with University of Phoenix; and
• You did not opt out of the University of Phoenix providing your contact information to the FTC.  

The FTC will issue payments automatically (no claims need to be filed) by check and by PayPal. A payment or claim form sent as part of an FTC settlement will include an explanation of, and details about, the case. For more information, visit the FTC’s website.