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Student Loan Law: 18.4.4.1 Claims Against Private Accrediting Agencies

Consider adding as a party to the lawsuit the private accrediting agency that accredited the defendant school. Although usually nonprofit organizations, these agencies may be an important alternative source of assets, particularly when schools are bankrupt or insolvent. Holding accrediting agencies accountable when they fail to properly oversee institutions they accredit may also improve the quality of accreditor oversight going forward.

Student Loan Law: 18.4.4.2 Claims Against State Licensing Agencies

Claims may be available against state licensing agencies that have the responsibility to review a school’s operation. For example, a New York appellate court allowed a claim to proceed when the students sought declaratory and injunctive relief to require the state education department to fulfill its statutory obligation to supervise private vocational schools.418 Sovereign immunity issues may arise when suing state licensing agencies.419

Student Loan Law: 18.4.4.3 Claims Against the Department of Education

In predatory school conduct cases, claims or counterclaims may also be available against the Department in relation to its role in providing or holding federal loans to attend the school—or for failure to follow legal requirements regarding schools participating in the federal student aid program or accreditors recognized by the Department.

Student Loan Law: 18.4.7.2 RICO

The Racketeer Influenced and Corrupt Organizations Act (RICO) provides for treble damages and attorney fees against entities involved in a pattern of fraud or violation of enumerated federal statutes.468 The RICO statute has a number of technical elements in the cause of action, which can make any RICO claim quite complex.469 On the other hand, the RICO claim’s structure is well-suited to bringing in as defendants not just the school, but also school personnel, lenders, accrediting associati

Student Loan Law: 18.4.7.3 The False Claims Act

The federal False Claims Act (FCA) does not provide a claim by which individual students directly seek recovery for their damages, but instead allows individuals to file and prosecute lawsuits in the name of the United States against entities that make false or fraudulent claims to the United States for payment of services and products.472 The individual bringing such an action can seek treble damages and civil penalties and is entitled to a percentage of the recovery.473 Consequently, the F

Student Loan Law: 18.4.7.5 The Telephone Consumer Protection Act

With the increasing use of lead generators and other aggressive school enrollment techniques involving telephone contacts with consumers,499 for-profit schools—as well as their agents—may have liability under the Telephone Consumer Protection Act (TCPA).500 The TCPA generally prohibits use of an automatic telephone dialing system or an artificial or prerecorded voice to make any call or send a text to a cellular phone, absent prior express consent from the consumer.

Student Loan Law: 18.4.8.1 Generally

Unfair and deceptive acts and practices (UDAP) claims are generally well-suited to challenge predatory school conduct. Every state has a statute broadly prohibiting deceptive practices and, in most states, unfair practices. Every state also provides a private UDAP remedy for actual damages. Most states also provide for attorney fees to the prevailing consumer, and in some cases statutory, multiple, or punitive damages.

Student Loan Law: 18.4.9.1 Generally

As discussed in § 17.2.3, supra, schools are generally not eligible for Title IV funds unless they are approved or licensed by the state in which they operate. All states therefore have statutes that provide for the approval and oversight of private higher education institutions.

Student Loan Law: 8.3.2 Post-Default Collection of Perkins Loans

Borrowers are in default on a Perkins Loan if they fail to make an installment payment when due or fail to comply with other terms of the promissory note or written repayment agreement.45 If a borrower defaults on a Perkins Loan, the school can seek collection through a lawsuit or otherwise.

Student Loan Law: 8.3.4 Special Default Issues Facing Incarcerated Borrowers

Student loan borrowers face special problems while incarcerated.80 Borrowers typically earn little or no income at all during periods of detention or imprisonment, making monthly loan repayment nearly impossible. Communicating with student loan servicing companies while incarcerated may be impracticable or even impossible due to prison restrictions on various means of communication, including limits on phone calls and internet use.

Student Loan Law: 18.4.9.2 State Agency Oversight and Minimum Standards

Most state statutes set minimum standards for the schools they regulate.551 Most state agencies, however, do not adequately enforce these standards or take action against abusive schools to protect consumers.552 In addition, although many state agencies have the authority to establish and enforce minimum job placement and completion rates, few have done so.553

Student Loan Law: 18.4.9.4 Cancellation and Refund Rights

A few states provide that students may cancel contracts before incurring liability.567 In Minnesota, for example, schools that use written contracts or enrollment agreements are required to refund all tuition, fees, and other charges paid by a student if the student gives written notice of cancellation within five business days after the day on which the contract was executed regardless of whether the program has started.568 When a student has been accepted by the school and has entered into

Student Loan Law: 18.4.10.2 Contract Claims

The threshold question in contract claims against schools is whether there is an enforceable contractual promise. Issues regarding contractual obligations and quality of education arise in all sectors of higher education, not just in for-profit schools.

Student Loan Law: 18.4.10.3 Fiduciary Duty

A fiduciary duty is generally understood as a “duty of utmost good faith, trust, confidence, and candor owed by a fiduciary to the beneficiary; a duty to act with the highest degree of honesty and loyalty toward another person and in the best interests of the other person.”600 There are few, if any, reported decisions finding a fiduciary relationship related to educational institutions and financial aid. A number of cases raising this claim have not been successful to date.601

Student Loan Law: 18.4.11 State RICO Claims

Approximately half the states have enacted state racketeering (RICO) laws that are similar to the federal RICO statute and that create a private cause of action.604 In some states, a state RICO claim may provide superior remedies to a UDAP claim, or the two together may provide more relief than just a UDAP claim.

Student Loan Law: 18.4.13 Proving Actual Damages

Student plaintiffs may have suffered a variety of actual damages as a result of predatory school conduct. In one case, the plaintiffs successfully argued that they would never have attended had they known of the school’s actual placement rate, which was lower than represented. The students’ actual damages were found to be their total tuition (even though most had graduated from the school) plus the students’ lost wages incurred when they left their jobs to attend the school.611

Student Loan Law: 8.4.3.3 Perkins Loan Collection Fees

There are distinct collection fee provisions for schools collecting Perkins Loans. Schools participating in the Perkins Loan Program must charge all reasonable costs with regard to a loan obligation.187 The amount of collection costs charged must be based on either the actual costs incurred for collection actions involving an individual borrower’s loan or average costs incurred for similar actions taken to collect loans in similar stages of delinquency.188