Heard of the “borrower defense” law?
The federal government opened the door last year.
Anyone with student debt will quickly find out it’s nearly impossible to escape.
Begging or even bankruptcy won’t make the loans go away.
But now, a flood of former students are turning to an obscure federal law to lose their loans – and for many of them, it’s working.
The law in question lets students ditch their loans if they can show their school made false or fraudulent claims to recruit them.
This could involve showing that a college lied about what a student would earn after graduation.
The law has been on the books for years, but it was only applied in three cases.Until last year, that is.
As the Wall Street Journal reports, the floodgates opened after the Department of Education announced it would forgive the loans of students who attended Corinthian College, a vocational school that went bankrupt amid a scandal over its marketing and lending practices.
According to the Journal, the government agreed to cancel the debt of 1,300 Corinthian students, and now more than 7,500 student borrowers are asking the Department of Education to wipe out loans worth more than $164 million.
Successful claimants can also recoup money they’ve already paid.
The law the students are citing is from 1994 and is known as a “borrower defense.”
Last year, a government official appointed to investigate the Corinthian scandal cited the law in a report, and said he would create a process that “would apply more broadly to students at all institutions who believe they have been defrauded by their colleges.”
Oh crap, this is gonna cost a bunch.
Read on!
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