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Following Suit: Student Loan Lawsuit Update

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Allegations have been made about unethical practices on the part of student loan companies. These allegations include financial fraud and violations of consumer protection laws.

• So far, at least one lawsuit has been filed against a student loan servicing company and a student loan lender. The plaintiff alleges her extra payments were not used to pay down the principal balance but were instead redirected to cover interest and monthly charges. (Case number 1:2012cv06583; Brietman v. Affiliated Computer Services, Inc. et al.)

• Other complaints include that the companies deny payments were made, even when customers have records of the payments; charging multiple late fees even though payments were processed; not issuing adequate student loan statements; violations of customer contracts; and retroactively adding interest to missed payments.

• Lawsuits have also been filed against some for-profit colleges, alleging those colleges mislead students about financial aid, including inflating costs of courses, keeping financial aid money for the school for services that are not provided and not providing a proper breakdown of the tuition fees.

• In Massachusetts, Corinthian Colleges faces a lawsuit filed by Attorney General Martha Coakley, alleging the school misrepresented training programs and job placement rates, and pushed students into high interest loans.

• In February 2014, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit against ITT Educational Services, Inc. The lawsuit alleges the for-profit college engages in predatory student lending, pushing students into high-cost private student loans and misleading students about future job prospects.


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