Lori Meadows
Independence University, formerly owned by CEHE, has been accused of exploiting its students and targeting vulnerable borrowers. The for-profit college has come under fire for abruptly closing down, leaving students with significant debt and uncertain options for loan forgiveness. Several students have reported that the university took out private loans without their knowledge, and some are now facing wage garnishment threats. While federal loans may be discharged due to the school's closure, private loans remain the responsibility of the borrower, unless successfully disputed. The Education Department has ordered CEHE to pay $23 million in closed-school loan discharges, but the organization has pushed back, accusing the department of forcing its closure. With a history of accusations and a class-action lawsuit won against them, the university's practices have caused significant financial hardship for its students.
| Characteristics | Values |
|---|---|
| Independence University closed down | Yes |
| Students were informed of the closure | No |
| Students were asked to pay back their loans | Yes |
| Students were threatened with wage garnishment | Yes |
| Students filed complaints | Yes |
| A class action lawsuit was filed against the university | Yes |
| The university was for-profit | Yes |
| The university was accused of exploiting vulnerable borrowers | Yes |
| The university was forgiven $130 million in student loans | Yes |
| The university was sued for $500 million in damages | Yes |
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What You'll Learn
Independence University's abrupt closure
The abrupt closure of Independence University has left students and borrowers in a difficult situation. The for-profit college, which was owned by CEHE, converted to non-profit status in 2018. However, there were chronic accusations that it was still operating as a for-profit college. In 2023, the Education Department put CEHE on the hook for $23 million in closed-school loan discharges, which led to the organization's closure.
The closure of Independence University has had a significant impact on its students and borrowers. Some students have reported that the university hid its impending closure, leaving them with no time to make alternative arrangements for their education. One student shared their experience on Reddit, explaining that they dropped out of the university due to financial hardship and were unaware that the university had taken out private loans in their name. Now, years later, they are being contacted by debt collectors and threatened with wage garnishment.
In the wake of Independence University's closure, many students are seeking loan forgiveness and legal recourse. Some have had their federal loans wiped away due to the school's closure, but private loans are more challenging to discharge. Students are advised to fight any student loans directly with FAFSA and research ways to erase collections from their credit history. There is also a class-action lawsuit against the university that students can join.
The impact of Independence University's closure extends beyond its students and borrowers. Taxpayers have also been affected, having paid more than $2 billion to the university over the last decade. The university was known for targeting vulnerable borrowers, and one student testified in a 2020 case that he had obtained three degrees from a CEHE institution, including a bachelor's degree in computer science, despite having a permanent cognitive disability. He paid $56,000 for his degrees and is now working as a dishwasher in a job for people with disabilities.
The closure of Independence University and the subsequent financial and legal fallout highlight the exploitative and anti-student environment that can thrive in the for-profit education sector. Students and borrowers are left dealing with the aftermath, often facing significant financial and legal challenges. It is important for those affected to seek legal advice and explore all options for loan forgiveness and recourse.
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Students' federal loans wiped clean
Several students have accused Independence University of fraudulent practices, claiming that the university took out private loans in their names without their knowledge. The university's abrupt closure left students with outstanding loans and uncertainty about their academic futures.
In such cases, students have a few options to address the situation. One option is to dispute the loans directly with FAFSA and appeal to have the collections removed from their credit history. Another option is to initiate a lawsuit against the university or the private loan company to seek loan discharge. However, it is important to note that fighting student loans and taking legal action can be complex and time-consuming.
While the US Department of Education has resumed collections on defaulted federal student loans, it is unclear if this specifically includes loans taken out with now-defunct fraudulent institutions. The Department of Education's Office of Federal Student Aid (FSA) is working to help borrowers return to repayment or get out of default through income-driven repayment plans and loan rehabilitation programs.
It is important to note that federal student loans are financed by American taxpayers, and the Biden-Harris Administration has been criticized for putting taxpayers "on the hook" for irresponsible lending. However, the administration has also faced criticism for failing to process applications for income-driven repayment plans and promoting illegal loan forgiveness schemes.
To ensure a smooth repayment process, borrowers in default will receive communications from FSA, urging them to take action, such as making monthly payments or enrolling in repayment plans. While the resumption of collections aims to protect taxpayers from the cost of federal student loans, it also highlights the complex and often challenging landscape of student loan repayment in the United States.
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Private loans still demanded repayment
Private loans are a tricky business, and it seems that even after Independence University's closure, some students are still being pursued for repayment. One student, who dropped out of the university in 2012 due to financial difficulties, was unaware that the university had taken out private loans in their name. Now, a decade later, they are being contacted by debt collectors threatening wage garnishment if the loans are not repaid. This is not an isolated incident, as other students have also reported similar experiences with the university and its parent organization, CEHE.
The issue of private loans taken out by Independence University without students' knowledge is a serious one. Students have reported feeling blindsided by the university's actions and are now struggling to deal with the financial consequences. In addition to the emotional and financial toll, some students are also facing threats of legal action from debt collectors. It is important to note that while federal student loans can be discharged in the event of a school closure, private loans are generally still the responsibility of the borrower.
However, it is not all doom and gloom for those affected. There are a few options available to students who find themselves in this difficult situation. One option is to fight the loans directly with FAFSA, as there has been a successful class-action lawsuit against the organization. Additionally, students can try to erase the collections from their credit record or wait out the seven years until the debt is no longer enforceable. Making minimum payments to debt collectors is also an option for those who cannot afford to settle the debt in full.
For those considering legal action, it is important to note that a lawsuit would need to be filed against the private loan company, rather than the university itself. This is because the loan company is the party seeking repayment. However, it may be challenging to gather the necessary evidence, especially if the loan has not been reported to any credit bureaus and the university has closed. Nonetheless, it may be worth pursuing legal action, especially if there is a breach of agreement by the university failing to provide the promised education.
The situation regarding Independence University and its private loans is complex and challenging for those affected. While there are options available to students, it is important to carefully consider the potential consequences and seek appropriate advice where necessary. The impact of this issue on students' financial and emotional well-being cannot be overstated, and it underscores the need for better regulation and protection for borrowers in the education sector.
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Class-action lawsuit against CEHE
In December 2022, CEHE sued the United States government for $500 million in the U.S. Court of Claims, alleging that the Department of Education forced its colleges to close. The lawsuit accuses the Education Department of breach of contract, breach of fiduciary duties, breach of good faith, and the illegal taking of funds.
CEHE, a Utah-based organization, bought several colleges in 2012 when they were for-profit institutions and attempted to convert them into nonprofits. However, the Obama administration blocked the move, and the colleges remained for-profit. In 2021, the colleges were placed under heightened cash monitoring 2 status, which requires colleges to front the money for students' federal financial aid payments. CEHE distributed about $43 million to students under this status but claims that the Education Department improperly denied its reimbursement requests.
The lawsuit also focuses on escrow deposits that CEHE made to maintain access to federal financial aid. CEHE alleges that the Education Department expressly told them that their colleges would be considered nonprofits but then retroactively imposed for-profit auditing requirements. The Education Department has maintained that it lawfully kept the funds and that CEHE is responsible for closed-school liabilities.
In addition to the lawsuit filed by CEHE, there have been allegations of student loan fraud involving the organization. Former students have claimed that CEHE continued to try to collect high-interest private loan debt from them even after the colleges closed. Some students have sought to discharge their loans or file lawsuits against the organization. The U.S. Justice Department is also pursuing a long-pending lawsuit against CEHE, joining whistleblowers in bringing False Claims Act fraud charges.
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$14.99
For-profit college conversion to non-profit status
For-profit colleges may seek to become non-profits for several reasons, such as aligning their mission and status, gaining eligibility for federal and state research grants, and receiving charitable donations. However, critics argue that some conversions result in "covert for-profit colleges," where institutions retain significant practices from their for-profit predecessors while evading additional federal scrutiny.
The process of conversion is complex and involves significant business, tax, financial, and regulatory considerations. A for-profit college seeking to become a non-profit must navigate federal tax rules, limitations on compensation, changes in governance, and potential difficulties in raising capital.
The U.S. Department of Education (ED) plays a crucial role in approving conversions. From 2011 to 2020, ED approved 35 colleges for conversion to nonprofit status, denied two, and had nine under review. However, ED has been criticized for not adequately monitoring newly converted colleges to assess the risk of improper benefit to insiders, such as former owners. In response to recommendations from the Government Accountability Office (GAO), ED agreed to develop and implement improved monitoring procedures.
The Internal Revenue Service (IRS) is responsible for assessing and approving applications for tax-exempt status. While IRS guidance instructs staff to scrutinize transactions with insiders, GAO found that in some cases, applications were approved without crucial information, such as the college's planned purchase price. Following GAO recommendations, IRS has committed to assessing and improving its review process.
The debate around for-profit college conversions is ongoing, with some arguing for tighter regulations to prevent predatory behavior and ensure accountability. The specific case of Independence University, a former for-profit college, highlights the complexities. After its conversion to non-profit status was initially rejected, the decision was reversed during the DeVos era. Students and borrowers have faced challenges, with allegations of an exploitative environment, sudden closure, and issues with student loans and debt collection.
Regarding student loans at Independence University, former students have reported difficulties and concerns. Some students were unaware of private loans taken out in their names, while others faced challenges with debt repayment and loan forgiveness after the university's closure. There have been reports of threats of wage garnishment and negative impacts on credit scores. However, it is important to note that federal student loans can be fought directly with FAFSA, and there is a class action lawsuit against the university that has been successful for some individuals.
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Frequently asked questions
You can fight any student loans directly with FAFSA. There is also a class-action lawsuit against the university that has been won by some people. You can also erase the collections from your credit record or wait out the 7 years.
If Independence University closes down, your federal loans can be wiped clean. However, you would still be responsible for any private loans unless you fight their discharge.
You can try to bring a claim against the student loan company to have the loan discharged. You can also file a civil complaint against the university, which was the servicer of your loan.
Independence University has been accused of hiding its closure from students, exploiting students, and targeting vulnerable borrowers. The former for-profit college’s conversion to non-profit status was rejected by the Obama Department of Education, but this decision was later reversed.
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