Student Lenders Immune from Loan Forgiveness Lawsuits
Student loans are often the only way that students can afford education.
And for many students, one of the saving graces of student loans is the federal debt forgiveness program that allows those who put their education to use in public service to have their loans forgiven after a decade of timely (income-based) payments.
Unfortunately for one borrower, despite allegedly being told she would qualify, when she could just start to see the finish line, her lender pulled the rug out from under her. And after having her lawsuit tossed out due to the lender being immune from her state claims, she is now preparing an appeal.
Lenders Aren't Friends or Fiduciaries
When it boils right down to it, student loan lenders (or any lenders for that matter) are not friends to their borrowers. Lenders are in the business of turning money into more money by giving borrowers money and charging borrowers interest on them giving back their money. It is the very epitome of the saying it takes money to make money.
For student borrowers, the path to federal loan forgiveness is not easy and rather confusing, and not really in a lender's best interest. It has been reported time and time again that borrowers were told they could qualify for forgiveness, only to find out that their lender was wrong and that their particular type of loan wouldn't actually qualify. Many of these situations involve loans that did not originate from the federal government, but rather private lenders. Fortunately, those private loans can be consolidated and made to qualify, but many lenders do not inform borrowers or, as alleged in the case mentioned above, mislead borrowers into believing their loans qualify.
As noted by CNBC, the Higher Education Act contains a provision that effectively renders student loan providers immune from state consumer protection claims. And in the case being appealed, the district court judge noted the troubling precedent that he could be setting by ruling that the immunity applied.
- Judge Rules for Students Fighting for Loan Forgiveness, Against Education Dept. (FindLaw's DC Circuit Blog)
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