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For-profit college graduates seek forgiveness of student loans in federal court

[JURIST] Two women filed suit [complaint, PDF] on Sunday against the US Department of Education [official website] and the Navient Corporation [official website] seeking immediate relief from their student loans due to harm caused by fraudulent claims from their for-profit college.

In a pleading filed with the US District Court for the Southern District of New York [official website], Tina Carr and Yvette Colon claim that they had previously submitted evidence that the Sanford-Brown Institute [corporate website] made fraudulent statements to the Board of Education and Navient, and that they were harmed by these misrepresentations. Neither entity accepted their evidence and claimed the women were still responsible for paying their loans. Their lawsuit alleges that Sanford-Brown misrepresented their career training program and the employment prospects of graduates. Since they did not receive the promised benefits of the program, the suit seeks a declaratory judgment deeming their federal Direct Loans, Federal FFEL loans, and private student loans unenforceable.

The former Sanford-Brown students are bringing action against the Department of Education and Navient because they are the entities that hold their loans. The suit asserts the "promissory notes that Plaintiffs signed when they borrowed student loans to attend Sanford-Brown give them the right to assert claims based on the Sanford-Brown Institute's ... misconduct against the entities that hold their loans". The suit thus relies on the Federal Trade Commission's Rule on Preservation of Consumers' Claims and Defenses ("Holder Rule") [official materials]. The "Holder Rule" allows consumers to raise the same claims and defenses against the holder of debt as they would against the original lender.

Currently, Department of Education has about 90,000 pending borrower-defense claims [Inside Higher Ed report] through the borrower defense to repayment [official site] program.

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