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: I was told my student loans were forgiven. So why does my account still say I owe $150,000?

After about six years of waiting, John Ferris received word from the Department of Education earlier this year that he would have about $150,000 in student loans discharged. But in the weeks leading up to student-loan payments resuming this month, he was still getting a bill for that debt. 

In late September, Ferris’s servicer, MOHELA, was telling him he would owe $600 on October 10. “There’s been some mixed messages to say the least,” he said at that time. 

Ferris has spent hours on hold going back and forth between MOHELA and the government. They each pointed at the other to resolve the situation, Ferris said. “I actually began to get frustrated so I did hang up the phone,” he said of one call. 

Now, his account on MOHELA’s website is showing that his loans are in an administrative hold until mid-November as the organization awaits instruction from the Department of Education. That’s even though the agency notified Ferris in February that his debt would be discharged as part of a deal to settle a class-action lawsuit with borrowers who were scammed by their schools.  

“We spend a lot of time calling the servicers waiting on hold, getting a response that doesn’t seem correct,” Ferris said of himself and his fellow borrowers who are covered by the settlement. “I had to call a few times and the various times that I call, I’ll always get a different answer each time. That’s the part where I think the Department of Education is partially failing. There’s no standard messaging between servicers, between customer service reps at the servicers.” 

Over the course of the Biden administration, the Department of Education has announced $22 billion-worth of student-debt discharges covering nearly 1.3 million borrowers who were scammed by their schools or saw their schools close abruptly. This relief was all promised to borrowers over the course of pandemic-era payment freeze. And yet, for borrowers like Ferris, the government and servicers couldn’t clear the debt from their accounts in time to avoid receiving bills ahead of the end of the pause this month. 

This relief for borrowers who were scammed by their schools is part of a broader effort by the Biden administration to cancel debt in cases where borrowers were already eligible for forgiveness under the law. For years, advocates and borrowers have complained that paperwork and technicalities have stymied access to already existing debt forgiveness programs. The $9 billion in debt cancellation officials announced in October, which applies to some public servants and borrowers who have been paying on their debt for more than 20 years, is part of that effort. 

In total, the Biden administration has approved $127 billion in debt cancellation for nearly 3.6 million borrowers so far. While many have seen their debt zeroed out, some are still waiting as payments resume. 

That borrowers who have been scammed by their school are still waiting on promised debt relief speaks to broader challenges the government and servicers are facing executing the return to student-loan payments after a more than three-year freeze. Borrowers have reported struggling to reach their servicers and receiving confusing or incorrect information when they do. 

But, according to Eileen Connor, the president and director of the Project on Predatory Lending, which represents Ferris borrowers in similar situations, their experience is evidence that servicers and the government are struggling to ensure the most basic of borrowers’ rights and comply with the law. 

“This seems like low hanging fruit to get right,” she said.  

“It’s understandably an enormous challenge,” Connor added, noting that the Office of Federal Student Aid, which oversees the student loan portfolio, doesn’t believe it has the resources it needs. After Congress failed to provide the agency with the full amount the Department of Education requested, servicers cut staff and hours.  “For me the thing that I’m focused on is that there are actually legal bars and legal protections that are being trampled on for this specific set of borrowers.”

“It’s a serious circumstance and it’s really distressing,” she said. 

Debt cancellation culmination of years of litigation and activism

The discharge notice Ferris received from the Department of Education in February is the culmination of years of litigation from Connor and her colleagues. The case centers around borrower defense, or the right borrowers possess to have their federal student loans discharged when they’ve been scammed by their schools. In order to access that relief, borrowers typically file an application known as a borrower defense claim. 

In 2019, borrowers sued the Department of Education and then-Secretary of Education Betsy DeVos, alleging the agency was ignoring their claims for relief. Last year, the court approved a settlement between the Department of Education and the borrowers. 

Under the agreement, borrowers who filed a borrower defense claim are entitled to have their debt canceled if they attended certain for-profit colleges where the Department of Education found a “strong indicia regarding substantial misconduct.” The deal is estimated to result in at least $6 billion in relief for borrowers.  

In addition to the agreement, known as the Sweet settlement for the named plaintiff, hundreds of thousands of other borrowers who were scammed by their schools have been promised debt discharges by the Department of Education over the course of the payment pause. Now, with payments resuming, some borrowers covered by these announcements are also still receiving bills, Connor said. 

All student loan borrowers are protected from the worst consequences of missing student-loan payments, including having Social Security checks and tax refunds garnished, through fall 2024. But the exact parameters of this so-called on ramp are unclear, Connor said. While borrowers wait to have their debt canceled they’ll still be reported as owing them to credit agencies, she said. 

In addition, asking borrowers to ignore demands from servicers that they pay a student loan bill on debt that’s been discharged “puts them in an unfair position,” Connor said. Some may choose to make payments to avoid a greater hit to their credit. 

In some cases, borrowers covered by the debt-relief announcements made by the Department of Education never filed a borrower defense claim. That means there isn’t necessarily a flag on their account that would pause their loans while their cancellation is being processed. 

‘There’s just no answers’

When Stacey Chmura first heard from the Department of Education in November that the bulk of her $48,000 in student debt would be canceled because she borrowed it to attend a now-shuttered for-profit college, she was skeptical. “I was like ‘is this real?’” she said. “Is this a legitimate thing or is this a scam? There are so many scams going on around,” student loans, she added. 

After waiting on hold several times, she was able to get through to someone at the Department of Education who confirmed that the debt would be forgiven. At the time, she said they told her it would take a few months for everyone’s servicer to be notified and for the cancellation to go through. That seemed reasonable given that hundreds of thousands of borrowers were in the same situation. Chmura, 38, also wasn’t too worried because student-loan payments were still paused and would be for months. 

Still, Chmura said she was concerned that “they couldn’t give me a deadline for when all the servicers were supposed to have it discharged. Since then I haven’t been able to get a hold of anybody and there’s just no answers.” 

In the weeks leading up to the end of the payment freeze, Chmura started to get anxious. She had yet to receive confirmation from her servicer, MOHELA, that her debt would be canceled. Instead, her account was showing that they’d put her in SAVE, the Biden administration’s new repayment program. Her account indicated that for the first 12 months she would pay $0 a month, but after that her payment would go up to $500 — an amount she and her family of five couldn’t afford. 

Chmura still couldn’t get through to MOHELA. She filed a borrower defense claim with the Department of Education in mid-September even though she isn’t required to do so in order to receive the relief she was promised in November. “I thought ‘well, I guess it can’t hurt,’” she said. 

At the end of September she received a letter from MOHELA saying that her loans would be put in an exceptional forbearance that wouldn’t start until September 2024 and would continue until 2040. The letter said interest would accrue on the debt during this period while the Department of Education reviewed her claim, according to Chmura. She still hasn’t received word on whether the debt would be canceled as payments resumed. 

Chmura took on the loans to attend Everest, a division of Corinthian Colleges, a for-profit college chain that shuttered in 2015 amid claims the school lured students with inflated claims about job placement and graduation. From 2005 to 2008, she studied to become a paralegal, but never used the degree. She now works as an assistant director of a preschool. Nonetheless, the loans have put a strain on her finances. For example, a family car had to be put solely in her husband’s name because her credit was too poor to have on the loan. 

That it’s taken so long for her debt to be wiped out, even though she was promised a discharge is “frustrating,” Chmura said. 

“Nobody ever wants to take responsibility for it and they just want to blame the other party or blame everybody else,” she said. “Nobody wants to actually help you. There’s no time frame of when it’s going to happen, it’s just ‘oh it’s going to happen,’” she said of the debt relief. 

A Department of Education spokesperson said the agency is “making clear” to borrowers and servicers that borrowers waiting for cancellations, like Chmura, don’t need to pay while those discharges are processed. “We’ve shared public language to reiterate this point” and are working with servicers to ensure these borrowers stay in forbearance, the spokesperson said.  

Borrowers waiting for discharges are particularly vulnerable

Borrowers who’ve been promised cancellation after being scammed by their schools are particularly likely to have little room in their budget to make a payment while they await a discharge, Connor said. 

“The thing about this set of borrowers is they were targeted specifically because of their economic vulnerability by schools,” she added. 

Despite the grace period and the notice of discharge, Ferris said during his conversation with representatives from his servicer he got the impression that he would have to pay his bill. “In their eyes you have to make a payment and you’re wrong and that’s a real headache for me, especially because there’s nothing I can do about it,” he said. 

The Department of Education instructed its servicers that any borrower who is covered by the Sweet settlement, like Ferris, isn’t obligated to pay while their claim for relief is processing, a Department spokesperson wrote in an email. 

“The Department continues to engage with servicers to ensure they comply with those instructions,” the spokesperson wrote. “The Department will seek more information on this matter so it can take timely and corrective action if it is warranted.”  

Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group, said resource constraints at the Department have made it difficult for staff to process the discharges quickly and send the files along to servicers. 

Paying to wait

Ferris, 45, got what he calls his “illegitimate loans” through pursuing a Ph.D at Walden University. Ferris was hoping the credential would help him pursue a career as a professor conducting political campaign research and teaching courses on the topic. 

He said he found his first years of coursework relatively easy and made it through quickly. But once he got to the dissertation process, the school would bill him about $4,500 a quarter while they reviewed his progress. After about four years of work, his dissertation committee signed off on the first three chapters and sent it onto the next level for review. 

The committee never raised significant issues about the dissertation in the four years Ferris worked on it, but the next level of reviewers essentially required him to re-do the whole dissertation. At that point, he was roughly $90,000 in debt for the dissertation alone and $130,000 in debt overall. 

He realized that there didn’t “seem to be any way out of it.” 

“It always seemed like they kept coming up with issues to keep me there and paying the large sum of money,” he said. Ultimately, he left before completing the degree. But he believes even if he finished he would have struggled to work in academia because of Walden’s reputation.

Walden University’s media relations team didn’t comment on Ferris’ situation directly, but said in an email that the school “operates with integrity and a vision to benefit future generations.” 

“We are deeply committed to helping our students—many of whom are from groups underrepresented in higher education—realize professional ambitions that may have otherwise seemed out of reach,” they wrote. 

Ferris, who works in affordable housing finance, initially applied to have the debt discharged in December of 2018. To have the loans he accrued at Walden finally wiped away would be “life changing,” he said. 

“We’re all waiting for this discharge because a lot of people want to move on with their lives,” he said. 

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