Recently, news about the University of Phoenix lawsuit created massive excitement among the students with educational loans. According to the lawsuit, the university and its parent company agreed on a $191 million worth settlement. From this amount, $141 million acts as a University of Phoenix Student Loan Forgiveness, and the rest is for consumer refunds.
In this guide, we will discuss the details of the lawsuit and determine who was eligible for forgiveness. Besides, we will help debtors who could not benefit from the University of Phoenix settlement to utilize other ways of debt elimination, which are Borrower’s Defense to Repayment, consolidation, and settlement through negotiation.
The Claims in the Lawsuit
The Federal Trade Commission frequently complains about institutions that, they believe, engage in fraudulent activities. Previously, the organization settled complaints with two other entities, the DeVry Education Group and the Career Education Corporation. The director of the agency’s Consumer Protection Bureau mentioned that they want students to make decisions based on facts, not lies.
The Federal Trade Commission also raised the issue against the University of Phoenix and its parent company. This organization claimed that the university utilized false advertising to attract students. Based on the charges, the university announced incorrect job replacement opportunities and falsely claimed that they work with major employers in curriculum development.
As a result of investigations, the university settled to pay a considerable amount of funds – $191 million to resolve this issue. The case requires the University of Phoenix to pay $50 million as cash refunds and use the rest of the settlement amount as loan forgiveness to erase the debt of students who could have been affected by the mentioned enrollment and advertising techniques.
Besides, they should inform the credit rating agencies to erase any adverse impacts of the debt from the credit history and send notice to debtors who are eligible for the forgiveness opportunity.
It should also be mentioned that the defendants in this lawsuit do not admit or deny any wrongdoings, as claimed in the complaint.
Who was Eligible for the Forgiveness?
Only specific borrowers had access to this University of Phoenix Student Loan Forgiveness opportunity. In more detail, students enrolled between October 2012- December 2016 became eligible.
Plus, only the loans owed directly to the university qualified for this forgiveness program. It means borrowers with federal or private loans cannot take their share of debt from the University of Phoenix settlement amount.
What if I have a Federal Loan?
Unfortunately, this settlement does not cover the borrowers with federal debt. However, there exists an option for such debtors. The Borrowers’ Defense to Repayment program is available to federal loan borrowers, and it provides a forgiveness option.
Borrower’s Defense to Repayment Program
Usually, student loan forgiveness programs for federal borrowers aim to help debtors who dedicate service in different fields. In contrast, Borrowers’ Defense to Repayment is unique as it does not require any mandatory service to grant student forgiveness.
Instead, this program aims to facilitate borrowers who made wrong decisions under the influence of misrepresentation or misconduct. In other words, if a student is misled by false advertising or is lied about the true costs of the education, this program can help her/him to eliminate the debt. However, this forgiveness program does not grant debt elimination in case of private issues such as harassment.
This way of getting the University of Phoenix Student Loan Forgiveness can bring different forgiveness amounts. Usually, the discharge percentage is calculated by comparing the income rate of the graduates studying at Phoenix University and other institutions. If a borrower receives approval from the review, he/she will find the forgiveness percentage in the notice.
Besides eliminating the debt, Borrowers’ Defense to Repayment can provide cash refunds to borrowers for their prior payments. However, there exists a time limitation for refunds which will equal the difference between what the debtor paid and the loan forgiveness amount.
Application to Borrower’s Defense to Repayment Plan
The selection process in this forgiveness opportunity relies solely on the proof that the student was misled. Therefore, it has utmost importance to prove the misconduct- the illegal or unethical activities – of the schools or recruiters to qualify for the discharge.
There exist several ways of application such as online, by email, or by mail. What is essential is collecting all the required documents beforehand to speed up the application process. As mentioned, one should prove the mismanagement case.
Hence, a borrower can submit email communications with the school officials, brochures with false promises, or any other document that supports the claims of the debtors. Besides, it is required to provide necessary information such as enrollment time, tuition fee, or degree obtained.
In the application, it is possible to see an agreement line for loan forbearance status. This status gives a right to the borrower not to make any interest payments during the period when the Department of Education reviews the case.
However, a borrower is free to get this status or reject it. Debtors need to keep in mind that even if they do not make payments, the interest will continue accumulating. If the application is rejected, they will be required to meet all the accumulated obligations.
What about Private Loans?
Loans from different private lenders are not eligible for $141 million worth of University of Phoenix Student Loan Forgiveness. Unfortunately, such loans also do not qualify for great opportunities accessible to the federal debt. Even if borrowers cannot get rid of the entire debt as in the case of Borrowers’ Defense to Repayment, they can still make their loans more manageable.
One of the common ways of taking control of debt payments is through student loan consolidation. This process combines two or more loans into one. As a result, the borrower makes one payment per month which usually has a lower interest rate.
It means the new payment for the month can be considerably less than the total payments in the case of multiple loans. Besides, as the number of loans decreases, it becomes more manageable for the borrowers to meet the deadlines and the necessary amounts.
Negotiations with the Lender
In some cases, it is possible to convince the private lender to provide additional flexibilities. If a borrower has no way of returning the debt based on the original conditions, the private lender can ensure he/she gets the lent amount by requiring a lower interest rate or delaying loan payments for a few months. In this way, the borrower will gain some time to recover the financial situation, and the lender will be able to collect the payments.
However, not all lenders will agree to settle with different loan terms. In this process, negotiation, communication, and persuasion skills play a huge role. It is necessary to convince the lender without causing disputes or disagreements.
The Federal Trade Commission sued the University of Phoenix and its parent company based on the claims that the university engaged in misleading ads and deceptive enrollment techniques.
Though the defendants did not admit or deny any wrongdoing, they settled for $191 million forgiveness and cash refund. This University of Phoenix settlement brought student debt relief worth $141 million to borrowers who owe directly to the university.
Other debtors with federal and student loans could not benefit from the University of Phoenix Student Loan Forgiveness. However, there still exist options for those debtors through Borrower’s Defense to Repayment, consolidation, or negotiation.
For Borrowers’ Defense:
What is the Likelihood of Receiving Borrower’s Defense to Repayment Forgiveness?
Currently, the probability of utilizing this forgiveness opportunity is higher than the recent years. During Trump’s administration, the program faced many challenges. However, president-elect Joe Biden wants to return the Borrower’s Defense rule. Hence, your chance can be higher in the upcoming years.
What is the Best Option for Private Borrowers?
Private student loan borrowers do not have access to the great programs offered for federal borrowers. However, they can still enjoy the benefits of settlements, refinancing, or negotiations with the lenders. Out of these options, refinancing can be the fastest and more guaranteed debt management program. It can decrease the monthly payments and improve the credit score in a short time.
How to Prove a Case for the Borrower’s Defense to Repayment?
It is advisable to keep all documentation and written communication related to the school, education program, or loan terms. Only in this way, one can prove the fraudulent case in the future. Besides, when applying, make sure you clearly explain the situation and support your arguments with proof.