There's an Obscure Law That May Expunge Your Student Debt
What you need to know about the "borrower defense." http://on.wsj.com/1QzjV4u
- •Americans who believe they were defrauded by their schools can apply to have their federal student loans forgivenThe program could be one of the few lifelines for hundreds of thousands of Americans buried in student debt after attending disreputable colleges or universities that failed to land them a decent job. Federal law prohibits student debt from being discharged in bankruptcy, except in rare cases.
- •The program is open to anyone who borrowed from the government’s Direct Loan program for any institution
- •It’s not entirely clear yet what’s required to get forgivenessThe law says students are entitled to forgiveness of existing debt if they can show their school violated state law in getting them to take out the debt. However, it’s not clear what documentation the borrower needs to prove fraud. The Education Department is currently drafting rules to clarify that.
- •In the past six months, more than 7,500 borrowers owing $164 million have appliedBefore last year, the Department of Education received 5 applications for forgiveness and granted three of them.
- •The sudden surge in claims has flummoxed the Education DepartmentOfficials say they are still trying to grasp the potential bill that will be footed by taxpayers. They say the cost of forgiveness could ultimately be in the billions of dollars.