Mishandling of student debt relief claims creating headaches

Chad Godfroy has saved every email from the U.S. Department of Education since submitting an application to have his federal student loans canceled in 2015. Despite the continued wait, Godfroy, 38, took comfort in knowing his payments would be postponed as long as his claim was under consideration.

He was elated to learn on Feb. 17, 2017, that the Education Department agreed to forgive the $33,000 he borrowed to pursue a criminal justice degree at the now-defunct Everest College in Wisconsin. In an email reviewed by the Washington Post, the agency assured Godfroy that his federal loans would be discharged within the next two to four months.

That never happened. Instead, the company servicing his loans informed him earlier this year that he owed $340 a month because his postponement period expired Jan. 30.

People such as Godfroy who are awaiting action on student loan forgiveness are suddenly facing debt collection, even though the Education Department is supposed to postpone loan payments while considering their applications.

The department is processing tens of thousands of applications for debt relief under a federal statute known as borrower defense to repayment. By law, borrowers can apply to have federal loans discharged if their college used illegal and deceptive tactics to persuade them to borrow money to attend. Scores of borrowers who attended defunct for-profit schools Corinthian Colleges and ITT Technical Institute have submitted claims and received a temporary postponement of their loan payments while awaiting a decision.

Though that postponement is good for 12 months, the Education Department has promised to automatically renew what’s known as administrative forbearance. A number of applicants, however, say that’s not happening. They say they are receiving bills asking for monthly payments on their federal student loans, despite never receiving a judgment on their application.

Christine Freeberg, 47, submitted a claim in February 2017 seeking a discharge of the $13,000 in debt she amassed pursuing a medical administrative assistant certificate from Corinthian’s Everest College. When she checked the status of her loans a year later, Freeberg discovered that a payment of $800 was due in March.

She called her loan servicer, which collects payments on behalf of the federal government, and was told the company never received the okay from the Education Department to automatically renew her postponement. It took several weeks and several calls before Freeberg was told her loans would be placed back into forbearance.

“Everyone gave me a different answer every time I called,” Freeberg said. “I don’t really think anyone knew what was going on and they had no clue how much longer it would take for my claim to be approved or denied.”

Godfroy has not been as fortunate in getting his

Student, Everest College

account resolved. The money he makes as a 911 operator stretches only so far and the thought of another bill has him worried.

“There is a good chance I wouldn’t have the money to pay my credit card bill or other bills if I have to start paying on the loan,” Godfroy said. “It’s supposed to be canceled.”

Education Department spokesperson Liz Hill said the Office of Federal Student Aid, the financial arm of the agency that is overseeing the defense claims, is aware of the problem with loan forgiveness.

“We have taken steps to quickly resolve this issue,” she said. “Any borrower who originally requested a forbearance and is not currently in one is being extended for an additional 12 months. Impacted borrowers should see resolution within next few weeks.”

Hill would not explain why the error occurred or disclose how many applicants have been affected.

The Education Department has known of the risk of applicants falling out of forbearance for months. In a letter to Sen. Richard Durbin, D-Ill., in July, acting undersecretary James Manning estimated that 31,000 borrowers were in jeopardy of their postponement period expiring in the next six months without an extension. But Manning made the risk seem negligible, noting that the department has a process in place to extend payment delays if a claim was still pending.

‘I don’t really think anyone knew what was going on and they had no clue how much longer it would take for my claim to be approved or denied.’

Christine Freeberg