They say one person’s misfortune is another’s gain, but the Department of Education doesn’t want that to be the case for tens of thousands of students affected by ITT Educational Services’ closure of 130 ITT Technical Institute campuses, no matter how good the deal sounds.
While now-former students of the for-profit college are likely exploring their options — seeking a discharge of student loans or transferring to a comparable school — a lack of information or misinformation could lead consumers to become victims of scammers.
The Dept. of Education reminded students on a recent webinar that they still have rights when it comes to their federal student loan debt.
“Please don’t pay anyone for help,” the Department said Wednesday, referring to companies offering to consolidate student debt or assist in applying for a closed school discharge. “There is absolutely no reason to pay for those services.”
While a company offering a quick fix may be enticing to students looking to put ITT’s closure behind them, it often isn’t the best solution.
“ITT students need to watch out for companies offering a quick fix to their current situation,” Suzanne Martindale, staff attorney for Consumers Union tells Consumerist. “Whether it’s a debt relief company saying they can help you cancel your loans, or another school pressuring you to sign up for their programs, look out for aggressive sales pitches. They may be making false promises or trying to get your money, taking advantage of you instead of actually helping you out.”
The Dept. — and consumer advocates — reminds students to work with their federal loan servicer, who is required to provide certain services to borrowers, often for free.
Still, it should come as no surprise if some students aren’t aware of their rights or the lurking dangers associated with student loans debt consolidation and school transfers.
In June, our colleagues at Consumer Reports released a survey [PDF] that found two-thirds of students who took out loans to pay for college say they had no idea what they were signing up for.
Among those borrowers, 27% said the information they received about debt management and consolidation assistance was not useful at all.
The Dept. of Education took time recently to remind borrowers of their rights. Here are a few things ITT Tech students should keep in mind:
Loan Consolidation
When it comes to loan consolidations, borrowers of federal financial aid are reminded to take the pros and cons into consideration.
The government offers consolidation through Direct Consolidation Loans. If a borrower is contacted by someone offering to consolidate your loans for a fee, you are not dealing with one of the Department’s consolidation servicers.
When considering consolidation, borrowers should look at their current loan benefits and determine if they are worth losing.
While loan consolidation can greatly simplify loan repayment by centralizing your loans to one bill and can lower monthly payments by giving you up to 30 years to repay your loans.
However, it can also lead borrowers to lose benefits such as interest rate discounts, principal rebates, or some loan cancellation benefits that were previously attached to the original loan.
Forgiveness Services
The Dept. warned former ITT students to be on the lookout for companies calling them offering assistance in filing for a loan discharge.
A loan discharge form can be found on the Department’s website. The application should be filled out and returned to a borrower’s loan servicer.
“Students need to apply directly to the Department of Education if they want to request a loan cancellation,” Martindale with Consumers Union tells Consumerist. “Some places, like legal aid offices, may have free resources to help people navigate their options – that’s a good place to start.”
Transfer Options
When Corinthian Colleges Inc. shuttered its Everest University, Heald College, and Wyotech campuses last year, advocates warned students that an onslaught of other — potentially nefarious — schools would be vying for their attention and money.
The same scenario could play out for ITT students. With larger marketing budgets and similar course of study, for-profit colleges could appear more attractive to displaced students, despite the Dept. of Education’s efforts to push community colleges as a viable education option.
Robyn Smith, Of Counsel for the National Consumer Law Center, told Consumerist last year that students should take their time before jumping into another relationship with other colleges.
“They need to watch out,” she tells Consumerist. “What happens when a for-profit closes is that another swoops in on students and starts to market their programs. We caution students to be smart on their next education choice, sometimes local community colleges are better, more affordable and have better programs.”
If a student does decide to attend another for-profit school, Smith suggests getting all of the terms in writing, especially if the school promised to allow credits to transfer.
Students may also want to use ED’s College Scorecard to explore your transfer options and find the program that’s right for you.
by Ashlee Kieler via Consumerist
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