How bad will it be for students if ITT Educational Services, the troubled for-profit school, fails? Ask the former students of a company called Wilfred.
To attend the Wilfred schools, students took out more than 61,000 loans between 1986 and 1994, court documents show. Decades later, many of these loans are still outstanding.
Former Wilfred students later confirmed in a lawsuit against the Department of Education that the company had obtained some of those federal loans without permission from students or by falsely certifying borrower eligibility.
Under these circumstances, students qualify for what’s known as a “false certification discharge,” a loan forgiveness arrangement created by Congress in 1992. In such cases, the secretary of education is supposed to “discharge the borrower’s liability on the loan (including interest and collection fees) by repaying the amount owed on the loan.”
But the Education Department never notified the former Wilfred students that they could be eligible for loan forgiveness, lawyers for the students say. For years, debt collectors hounded borrowers for repayment. Many have had their tax refunds taken away.
The department’s failure to alert these students to possible loan forgiveness is the subject of the 2014 lawsuit brought by former Wilfred students. The suit contends that the Education Department violated the Administrative Procedure Act, which governs the activities of federal agencies.
The Education Department has fought the lawsuit at every turn. A spokesman did not immediately respond to a request for comment.