In 2006, I started attending Kennedy Western University online.  At the time, the institution was not accredited, but had promised that they would be by the end of the year.  I figured, ok, it was a school that was recommended by a coworker so it couldn’t be all that bad.  Also at that time, the school said that I would have to take out a private student loan, as I didn’t qualify for a federal student loan.  They had set me up with Wells Fargo.  Unbeknownst to me, this was a ruse, but back to that later.  I continued to attend this online school, purchasing textbooks and completing homework online, everything part-time while I worked a full-time job and am a single mother of two kids. 

About one to one-and-a-half years later, this school sold its students to Warren National University, claiming they had exhausted all efforts to obtain accreditation.  Prior to the takeover, I had two classes left before obtaining my Bachelor’s degree.  When the new school took over, they added to my courses, stating that I had to complete additional courses to complete my degree. Then, in 2009, they announced that they were closing their doors for good, also claiming that they had exhausted all efforts to obtain accreditation, but were not successful.  I had five courses left, and they gave me 3 months to complete them, otherwise, I wouldn’t get my degree.  Well, being a single mother, working full-time, even ONE course was difficult at best, how the hell was I supposed to complete 5 in 3 months time?  Impossible.  They suggested transferring to another school.  But after searching other online colleges, NOT ONE would accept any of the credits I had already accrued, each said I would have to start all over, including getting a new loan! 

After the school closed, my loan went into repayment mode, so I began making the minimum payment while I tried writing to boards of education and repeated attempts to contact the school to get my money back.  The state said they couldn’t help me, the school refused my calls and wouldn’t reply to any of my emails. 

Now I’m stuck with $10,000 in a private student loan and NO DEGREE.  Two years ago, my ex-spouse lost his job, so child support was reduced.  This year, his unemployment benefits ran out, so now I don’t receive ANY child support.  To top all that off, I lost my job this year too!  Wells Fargo calls me every other day asking for a payment, they once threatened to take my house, they WILL NOT NEGOTIATE for anything.  I offered to pay the interest only off the loan, stating that I didn’t get what I paid for, and they still won’t budge. 

With the loss of my job, I can’t even pay for the mortgage (unemployment per month doesn’t even equal my mortgage payment).  I have medical bills, a car payment, school fees, food, utilities, etc.  I can barely keep my head above water, and I will not be paying the mortgage anymore since we have to eat.

PLEASE, if there is ANYTHING you can do to help me with this student loan problem, I would appreciate ANY and ALL advice on how to get out of this loan.  Wells Fargo has repeatedly stated that private student loans are not discharged through bankruptcy, and if I get a new job, there’s no way I want them garnishing my wages That would totally defeat the purpose of getting a new job!  They would take my whole check and I would have nothing left for food or shelter! 

I appreciate your time in reading this.  I sincerely hope there is something out there that I could try, I’ve come to the end of my rope and don’t know where else to turn!  Thanks.

Hello there.  We’re very sorry that you are in this situation.  My name is James and I am Heather’s Communications Director (and husband).  Unfortunately the problems you experienced with “for-profit” online schools are all too common.  Here is a link to the Senator Harkin report on for-profit schools: http://askheatherjarvis.com/blog/sen.-harkin-report-to-blast-for-profit-colleges.  You may want to consider contacting his office to share your story with his staff as they may have additional resources to put you in touch with than what I will describe below.

Since you mentioned your concerns about wage garnishment, here is a link to information about that issue: http://www.studentloanborrowerassistance.org/collections/government-collection-tools/admin-wage-garnishments/.  Of note, private lenders cannot garnish your wages unless they obtain a judgment against you in court.

If I read your e-mail correctly, it sounds as if you only have private student loans.  Things to consider: private collectors do not have as many collection tools as the government.  There is a time limit for collection.  The limits vary by state, but tend to be six years after default.  A consumer law attorney in your state could research the statute of limitations where you are.  Often private lenders will hire collection agencies.  You have certain rights to fight back against any harassment or abuse by collection agencies.  Collection fees for private loans should be listed in your loan agreement.  There may also be other laws in your state that limit the amount of collection fees that private creditors can charge.  As I mentioned above, the main thing a private lender can do is sue you in court.  Some private lenders may eventually negotiate a payment plan or debt settlement with you.  If it ever comes to that, here is a link with some information on settlement of private loans: http://www.studentloanborrowerassistance.org/default-and-delinquency/compromise-settlement/.

As for what to pay first when your financial circumstances are tough, it makes sense to pay first your rent, mortgage, utility payments, or other high priority debts.  As for private student loans, I don’t see them as that different from other unsecured debt like credit cards or personal loans, and therefore are low priority as compared to essential needs.

Finally, and probably most importantly for your situation, LawHelp.org helps low and moderate income people find free legal aid referrals.  Court clerks often have information about legal services programs as well: http://www.lawhelp.org/.  Also, the Consumer Finance Protection Agency was created to prevent borrower abuses such as you described.  The agency has an ombudsman, who helps borrowers with difficult problems.  The ombudsman’s web site is http://studentaid.ed.gov/redirects/ombudsman-ed-gov.  Borrowers can submit problems online. The toll-free phone number is 877-557-2575 and the fax number is 202-275-0549; the mailing address is U.S. Department of Education, FSA Ombudsman, 830 First Street, N.E., Washington, D.C. 20202-5144.

Read through this stuff carefully and you should have a clearer understanding of your options.  Sorry for the long e-mail.  Please let us know as other questions arise.

Sincerely,

James Jarvis
Communications Director
Heather Jarvis, Student Loan Expert LLC