A lawsuit dating back to the 90s has recently been brought back up to the U.S. Court of Appeals; the case involves unlawful student loans that were disbursed to students attending a beauty school chain.
To provide some background, Wilfred American Education Corp began disbursing loans to students interested in attending a trade school chain known as Wilfred Academy. These loans were disbursed between 1986 and 1994; overall, they dispersed over 60,000 loans while becoming eligible for over $400 million dollars in federal student aid.
They targeted low income people as well as immigrants who technically were not eligible to receive financial aid. Many of these borrowers lacked high school diplomas, and many were basically not certified or eligible to receive financial aid.
The last trade school closed in 1994. And by 1996, Wilfred American Education Corp was guilty of financial aid fraud which was admitted by the Department of Education. Many of those loans were unlawfully disbursed which made them eligible for discharge.
The scam did not stop there because Wilfred agency continued to collect on those student loans. The unlucky borrowers were losing tax refunds and having wages garnished.
As mentioned earlier, the lawsuit was brought up to the United States appeals court in New York. The 2nd U.S. Circuit Court of Appeals voted 3-0 confirming the validity of the case involving the unlawful loan disbursement back in the 80s and 90s.
This is promising news compared to the previous year in which District Judge Sweet dismissed the case. The reasoning being that the Department of Education acted within its bounds of authority and discretion.
This is a step towards getting those loans discharged, but the Department of Education still must be pressed further in order to reach that goal. At any rate, the decision by the U.S. court of appeals will simplify the process increasing the chances of the loans getting discharged.
While this lawsuit is experiencing success, the issue is definitely not over due to the large number of loans that were dispersed. There are plenty of individuals out there who may be experiencing some of the troubles listed earlier such as wage garnishment.
With the appeals court decision, the case is being sent back to the District Judge with the possibility of becoming a class action lawsuit.