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Project on Predatory Student Lending Student Saves Client Over $40,000

The Project on Predatory Student Lending recently helped save a client over $44,000.  A problem in his federal student loan consolidation left him with several defaulted loans.  He came to the clinic because he was struggling to repay his loans, and because he did not understand why he still had defaulted loans after his consolidation.

His student attorney, Alison Sher, reviewed the client’s loan records and discovered errors in his loan consolidation process. The client had consolidated his loans in an effort to get them out of default and begin repaying them.  When his loans were supposedly consolidated, several of his loans were improperly excluded from the consolidation.  Two problems arose with the loans that were “left out” of the consolidation.  First, these loans remained in default, leaving the client at risk of the extraordinary collection powers of the federal government. For example, the federal government may seize borrowers’ earned income tax credits and garnish their wages without seeking a judgment in court.  The second problem was that the outstanding balance for these unconsolidated loans was included twice in the client’s outstanding loan totals.

Alison researched, wrote, and submitted a statement explaining these problems to the federal student loan ombudsman, who helps borrowers fix problems that their servicers cannot or will not correct.  As a result, the ombudsman removed over $24,000 in interest from the account, and also removed the erroneous defaulted loans and the interest that had accrued on those loans, amounting to more than $20,000 of additional relief.

Alison also addressed the client’s concerns by ensuring that he understood what steps we took on his behalf and his reduced outstanding balance. She also made sure that the client enrolled in an income–driven repayment plan, so that his payments would be affordable and his loans would not go into default in the future.

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