Education is something that is seen as highly valued, and many want their children going to college after they graduate high school because of this viewpoint. The problems start when for-profit colleges are failing to live up to their end of the bargain. Many of these colleges are shutting down since the federal government has started cracking down on them due to their methodology in getting students to sign up. Many of these schools were found to be using fraudulent practices to entice students, and these students may feel that they have no recourse against paying their student loans. The truth of the matter is that there are forgiveness programs out there for students who are struggling with making repayments or have been defrauded by for-profit colleges.
For-Profit Colleges Are Shutting Down
The Obama Administration is cracking down on for-profit colleges that are exploiting their students. The federal government has been introducing increased regulations on for-profit educators to help combat the increasing student loan debt that is seen today. Students are being told things like a particular career field has a higher pay or that there is a higher placement rate for students who earn such and such a degree, and these fraudulent statements convince students that they should sign on the dotted line for federal financial aid and other financial aid packages.
Once students drop out or finish their degree, the bill comes due, and many find it extremely hard to pay off their debts because they are unable to find a job in the career associated with their degree, or they are not making nearly as much as they were originally promised by the school when they signed up. This means that many students are defaulting on their loans. As of 2014, 650,000 individuals had defaulted on their federal student loans with several for-profit universities holding the highest percentage of these loans. University of Phoenix, ITT Technical Institute, Kaplan University, and DeVry University are all for-profits that are in the top four of schools with the most student loan defaulters.
Some may think these changes are only for those who will be starting school, but that is not the case. This action by the federal government does have a silver lining for students who are currently attending a for-profit school and those who have previously attended one. They can start to see a light at the end of the tunnel when it comes to their student debt, and take advantage of some repayment programs that are meant to make life a little easier to live after graduation.
Corinthian Colleges is Bankrupt
Students who attended or were attending Corinthian Colleges were blindsided with the news that Corinthian Colleges were closing all 30 of their campuses in April of 2015. The executive of the college blamed the government’s regulations for having to shut their doors, and then filed for bankruptcy. They blame the fact that the college lost federal financial aid status and was fined 30 million dollars by regulators.
These executives see nothing wrong with their behavior as a for-profit company. Prosecutors are accusing the college of lying about job placement data to get students to enroll in their programs - data that is often vital in convincing a student on whether or not a particular program will be worth their time, money, and energy. This fraudulent information may not have been the final deciding factor, but regulators have had enough with these types of practices that can negatively impact students.
The bottom line for the students involved with Corinthian College is that the collapse was pretty dramatic, and they are left wondering what their next steps will be on their way to the degree of their choosing. Many have to worry if their credits will be transferable to another college. Many are wondering what will become of their student loans now that the school has closed down. They may wonder why they should still have to pay on a debt when they can no longer attend classes because of something on the behalf of the school. This can be a very scary time for students. Things aren’t looking very good for other for-profit schools either.
Career Education Corporation
Career Education Corporation is another for-profit school that is lacking when it comes to their business practices for students, and they are having to revamp the way that they are currently handling their business. This company handles several different career colleges, such as Sanford-Brown Colleges, Brooks Institute, Le Cordon Bleu Colleges of Culinary Arts, Missouri College, Briarcliffe College, American InterContinental University, and the Colorado Technical University. Due to an investigation into their company, changes are being made.
The 10 million dollar settlement contains a one million dollar penalty, and the rest is being used for restitution for students that were misled by the school during the academic years of 2009-2010 to 2011-2012, although the corporation itself claimed there was no wrongdoing on their part.
Regulators found that Career Education Corporation was using a fraudulent marketing technique to get students to sign up based on false advertising information on the percentage of students who were able to get a job in their field after graduation. The actual rates were 24 to 64 percent, but the school was advertising that their rates were 55 to 80 percent. That is a pretty big difference, and what student wouldn’t look favorably on those rates?
It was also found that the company failed to inform their students that their degrees would not qualify them to be able to take the necessary state licensing exams after they completed their programs, which could result in them being unable to obtain employment without having to go through another program to get the qualifications they needed for the exams - meaning more time and money would have to be spent.
Due to these unsavory practices, having repercussions in 2015, the company is looking to consolidate their efforts and focus on keeping both the Colorado Technical University and American InterContinental University up to par with regulations. The rest of their brands are either being closed or sold off to other companies.
Students, again, are left wondering what their future will hold if they believe that they were given fraudulent information to sign up for their program or what will happen if their school is closed or sold. This can lead to worry over how their student loan debts will be treated.
Education Management Corporation
Education Management Corporation is another for-profit company that is dealing with hard times. They own South University, Argosy University, Brown Mackie College, and The Art Institutes, with about 112,000 students. In 2015, they had to cancel over $1.3 billion in outstanding debt to have two lien loans given to them that start becoming due in 2020. From this massive debt restructuring, there have been eight members of the board of directors that have resigned out of the 11 members that comprise the board.
To keep up with the demands of new regulations, they also have to downsize their campuses. About 25 percent of the Art Institutes campuses will be eliminated, and about fifteen of the other campuses will also be shut down. There will be 5,400 students affected by these shutdowns.
Students that attended these colleges may also be worried about their student debt, and what repayment means to them.
Apollo Education Group
Apollo Education Group may not sound familiar until you realize that it is the corporation behind the University of Phoenix. Although, this company is not in the same rocky shores as the previously mentioned companies, they are still facing some concerns about their future, and students are caught up in the middle yet again. This company has lost about half of their worth, and they are under the same scrutiny that these other for-profit colleges have been facing when it comes to their recruiting practices.
There are two areas where this business is facing problems. They have a poor graduation rate, and their students have a high rate of defaulting on their loans. This has led to the conclusion that students are either unable to finish their programs for one reason or another, and that graduates are unable to find jobs that will allow for them to pay off their student loans.
Students should stay up-to-date on the new regulations as they may find that their student loan debt may qualify them for a federal student loan forgiveness program.
Department of Education’s “Gainful Employment” Rules
Of the regulations that are hurting for-profit colleges, the new “Gainful Employment” Rules that has been established by the Department of Education is among the most influential. The name says it all in that these new regulations require that an institution that handles degree and certificate programs improves their programs so that the students will be able to find gainful employment after they graduate and that protections are put in place to deal with fraud, abuse, and waste.
These rules are for both nonprofits and for-profits. But, in most instances, they are targeting the for-profits. The administration is putting together a task force that will investigate these issues while protecting consumers. Schools that do not meet these standards will no longer be able to get federal students loans for their students. Often, this means that they cannot operate any longer.
Highlights of the “Gainful Employment” Rule is that it will work to prevent students from facing a huge amount of debt after graduation, provide better accountability for programs, add more transparency on the success of previous students to help future students decide if a program is right for them, and work to build better outcomes for students engaged in career training programs.
They estimated in 2014 that about 1,400 school programs would not meet the rules for this regulation, and that about 840,000 students would not meet it with only 1 percent of these individuals in the nonprofit sector of education. That means about 99 percent of the students that would not meet these requirements are attending for-profit schools.
Regulators see the collapse of Corinthian Colleges and the problems plaguing these other for-profit schools as evidence that the for-profit industry is unable to meet the education needs of their students. This rule will help to keep for-profit colleges honest in their recruiting methods and the services that they present to their students. Any business that provided poor customer service would face problems. Finally, for-profit schools are starting to feel the sting of their poor customer service.
President Obama’s Opinion of For-Profit Scheme
A White House official notes that the president is serious about dealing with scandalous for-profit schools because he believes in the importance of shutting schools down that take advantage of their students. As with many things in his administration, he ha had to fight an uphill battle to get some of his ideas into place, such as the “Gainful Employment” Rule.
The fact that there have been abuses on the part of school employees to target individuals who are particularly vulnerable has helped him in his cause. Often, for-profit schools appeal to individuals who are often non-traditional students. A study found that students who attend for-profit schools are more often female, older, and African American. Another report found that these students are often the first to attend college in their family, and are usually from low-income families. Burying these individuals in extensive student loan debt when they are already in a state of needing help is something that the president does not want to happen.
2015 has been a big year with the downfall of several for-profit colleges, and can be seen as a classic cautionary tale on the state of the financial sector. Some see for-profit schools as a byproduct of federal financial aid that allows for the system to grant these institutions to act in a way that can be likened to predatory lenders. President Obama may not be successful in shutting down all for-profit schools before he is out of office, but with the new regulations his administration has, instituted there are more checks in place to protect consumers when it comes to their education.
Students who already have started or graduated school may feel as though they fell through the cracks, but these new regulations include debt forgiveness programs that can help them as well.
President Obama’s Federal Student Loan Debt Forgiveness Program
President Obama has been busy when it comes to the different federal student loan debt forgiveness programs that are in effect to help students who are suffering under the weight of their student loan debt. There have been changes made to PAYE to create REPAYE and the Public Service Loan Forgiveness Program. Each of these programs helps borrowers handle their debt and, after a period of time, all qualifying federal student loans can be discharged. Each of these has different rules and regulations. This means that although a graduate may not be eligible for one of them, he or she may be eligible for a different one.
The original PAYE program was a way to help students who needed assistance. It capped the amount that borrowers under this repayment plan had to pay out on their loans to 15 percent of their discretionary income. Discretionary income is that amount that is left over after paying the bills that are deemed necessities, such as rent. This is based on the borrower’s income and the number of people in the family. This repayment plan also used to allow students to have their loans forgiven after they have made 300 payments.
The original PAYE program was updated in 2015 to help students with a few changes to make it more beneficial. The REPAYE program is the resulting program which creates better options for students who had to borrow to attend school.
It is also a pay as you earn program that provides students with a plan that allows them to make payments that are based on their actual income. This payment will be capped at 10 percent of the discretionary income, meaning that it is tailored to fit the needs of the student rather than just a payment that doesn’t care how much money is being made after graduation. This five percent change may not seem like a lot, but it can be extremely helpful for struggling borrowers.
This program is perfect for those students who find that their education doesn’t match up with their job prospects after school. It also works for those students who have graduated but found a more entry-level position. At the beginning of their loan repayment, they are paying less because they are making less. However, as they start earning more money with their experience level, their payments increase.
The final aspect of this repayment plan that is worth noting is that after 240 payments, which equals about 20 years, rather than 300 payments as in the PAYE program, the remaining balance on this loan is forgiven. This means that this loan will no longer need to be paid, and the borrower will now be free and clear from their debt.
Public Service Loan Repayment Program
The Public Service Loan Repayment Program, or PSLF Program, is another excellent program. But there are some potential changes coming down the pipeline that may change how borrowers are able to take advantage of this repayment program. Here is what you need to know about how it currently stands.
Those eligible for this repayment program are those who are giving back to the community in their position. Often, if the borrower is employed by the government, a nonprofit, or other public service company, and work at least 30 hours a week, they fall under this repayment program. This weekly time may be split among two part-time jobs. This includes those who serve full-time in the Peace Corps and AmeriCorps.
As with the previous loan, there is a period of time for when the loan will be forgiven, and that is half of what it is under the REPAYE program because of the type of job that person is doing in the community. So, that means that with 120 monthly payments, the remaining loan amount will be forgiven. Some borrowers may be under the impression that this happens automatically, but paperwork must be submitted to start this process.
One final area that students may be surprised to discover is that they may be eligible to have their loans discharged if they believe that the school that they attended gave them fraudulent information which caused them to sign on the dotted line to be accepted into a school. Every student’s story may be different, and there are no set guidelines on how the Department of Education will rule on individual instances, but if there is any suspected fraud it can be prudent to set this ball into motion.
Students will notify the Department of Education if they believe that they were defrauded by the school. During this process, the loans in question will go into deferment or forbearance. This means that they may accrue interest, but no payments are due during this time.
If a case of fraud unfounded, the deferment or forbearance status of the loan will be removed, future payments will be due, and the borrower will be responsible for the interest that was accrued during this period of time. However, if the borrower’s case of fraud is upheld by the Department of Education, the loan will be discharged. Not only that, but any funds that the student paid towards the balance of their federal students loans may be repaid to them due to the fraud. This action typically happens in fraud cases to help the victim become whole again.
Previously, there had been an eligibility restriction on anyone that had borrowed funds before October of 2007, but, as of the end of 2015, those restrictions are no longer in place for undergraduates. Now, the only group that faces eligibility restrictions under these programs are parents that helped their children pay for the cost of their education with PLUS loans.
The best route to take when it comes to student loan debt and the eligibility for these programs is to get any questions answered that may pop up about the issue. Some people may find that they would be eligible for a program but continue to struggle to pay their monthly bills on top of their student loan bill because they didn’t look for help. Learning more about eligibility and these different programs is a step in the right direction that can make a huge difference in many graduates’ lives.
Are you unsure of what and who to ask about these programs and what you are eligible for?
Questions to Ask About Program Changes
Students may be wondering where to start with learning more about what their particular situation means for these repayment and forgiveness programs.
Some questions that should be kept in mind are:
- What is loan forgiveness?
- Who qualifies?
- How do you apply?
- How does it work?
- Are private loans covered?
- What loans are eligible?
- What is pay as you earn?
- Should I consolidate my loans?
- Should I sign up for automatic payments?
- Does the New Plan Cap Student Loan Interest Rates?
- Are Defaulted Loans Eligible?
Every situation is going to be different, and it is hard to generalize how a person may fit into these programs without more information about their particular situation. Different factors will include what school they attended, what level of school they were attending if the person is in default, the types of loans they had secured, and other information. This means that every case will need individual attention.
Financial aid can be hard to understand when first starting school - with all the different forms and items required to qualify for it. Some schools may not adequately explain the process to their potential students, and some students may not feel it’s necessary to really understand it as long as their loans are approved to get started with their studies. Then, it comes time for repayment to begin, and students may not understand this process or what avenues they have open to them with their repayment. That is where Process My Student Loans comes in to help with all the different ins and outs of student loan repayment programs.
Our case managers are ready to help students who have been struggling with their student loans. Students do not have to rely on generic information on which paths might be the best for them to take, but will be given the help they need to handle their student loan repayment in the most economical manner for them.
Don’t go into this alone. Let us help you fight the red tape that can surround federal student loan processes. There are often multiple steps that need to be taken when dealing with your student loan repayment programs, and one wrong answer to a question or improperly filled out form may spell disaster for your efforts to get help with your student loan debt.