avoiding federal student loan default

Students Take Stand: Refuse to Pay Federal Student Loans

Michael Lux Blog, News, Student Loans 1 Comment

They are called the “Corinthian 15” and this group of former students have elected to ignore their federal government student loan bills.  According to the group, backed by an Occupy Wall Street offshoot, the federal government failed them.  They claim that the Department of Education allowed Corinthian schools to lie about the quality of education that students received.

According to lawyers from the Justice Department, Secretary of Education Arne Duncan has complete discretion to cancel student loans if he feels that the students were defrauded.  In the case of the Corinthian schools, he has not elected to do so.

Corinthian schools have been the subject of a number of for-profit school controversies, most recently they were in the news as part of an agreement with the Consumer Financial Protection Bureau.  The agreement with the CFPB, forced the sale of a number of Corinthian campuses and resulted in over $480 million dollars worth of student loans being wiped off the books.

Despite the issues with Coronation, the Department of Education has not acted on behalf of students.

As one of the Corinthian 15 put it, “I’m not going to pay anything.  I had perfect attendance, graduated when I was supposed to, and this is what I get in return for trying to better myself.  I have nothing, and it’s not my fault.”

What will happen with this group?

While it might be easy to cast aside the Corinthian 15 as a bunch of down on their luck recent grads trying to get out of their obligations, they have certainly risked much to take their stand.

Any unemployed individual has the option of going on an Income Based Repayment plan and lowering their monthly payments to $0 per month.  These $0 payment months all count towards student loan forgiveness.

Rather than filling out the paperwork to get enrolled in IBR these students have all chosen to let their debt fall delinquent… and it is only a matter of time before they default on their student loans.  This means a variety of negative consequences including: a destroyed credit score, wage garnishments, and the federal government keeping tax refund checks.

These students are not presently involved in a lawsuit with either the Department of Education or Corinthian, so there isn’t much of an expectation for a quick resolution for this issue.  In time, we will learn of the collection efforts that the Department of Education uses to go after these students.

For now, the best they can do is look for work and hope the government changes its mind on Corinthian or student loans in general.  They are likely headed for some tough times.

  • These “for profit” schools were always a rip off! I am surprised how many people fall for it. Not repaying the loan is not the answer. They should learn from their mistakes and go on If they are looking for relief, band together and write their congressman.