Federal Trade Commission s ruling to Devry University and its related parent company, Ivy League School of Business, was a whopping six billion dollar settlement. Half of this is to be paid back by the schools and the other half will be given to the students and their families. Over half a Trillion dollars will be eliminated from the pockets of students and their families.
This is the second largest settlement made by the Federal Trade Commission in a single year. In August of 2021 the Commission imposed a $100 million fine on Devry University for cheating their students out of their federally funded student loans. The fine was later lowered to only paying back $40 million. The punishment started with the Federal Trade Commission’s Enforcement Division s finding that an Ivy League school knowingly deceived its students in order to get a federal student loan. The investigation found that the Devry University violated the FAFSA rules and that their student loan programs did not meet the necessary criteria for the program to be legitimate.
This is only one case of cheating former student loan borrowers. There are many more reported cases and the Federal Trade Commission has been involved in settlements over the past couple of years that have totaled more than a trillion. The main reasons cited in the complaints against Devry University was their hiring practices, their promotion policies, their disclosure statements and their employment rates. All three of these factors directly affect the amount of debt forgiveness, a university student can receive.
Employment Rates: When applying for a government-guaranteed loan, such as the FFEL or Perkins, the borrower must obtain a maximum monthly percentage rate. The Department of Education calculates that a borrower needs to receive at least an interest rate of ten percent over the life of the loan. This means that a borrower who plans on paying back ten percent over ten years will only receive a portion of the expected amount. However, if the borrower receives a generous settlement, then repayment may not be suspended during this period. If a lender does not suspend repayments, borrowers are granted a refund because of the generous settlement.
Disclosure Statement: A generous settlement does not make a good disclosure statement. In fact, it only makes the act of lying much worse. If a lender discovers that the deception is involved in the process of obtaining government student loans, then the deception may be classified as income or business identity theft. Students who lie about their incomes are given harsher punishments than borrowers who do not.
Excessive Debt: Many borrowers are unaware that once they begin to accrue excessive debt that they are not able to obtain a federal student loan forgiveness program. Students have two options if they feel they are in over their head. They can declare bankruptcy or they can consolidate their debt with a for-profit college. Although a for-profit college can offer more education in comparison to other institutions, it is still much more difficult to get a loan forgiveness program. At Devry University, no loans are disbursed to students who are declared bankrupt.
Income Discharge: Students who conceal their actual incomes are not forgiven the debt they accrued during their time at Devry University. It is very likely that the borrower earned less than the amount the school calculated their annual income to be. If the borrower indicates an incorrect income, the lender may then deem the borrower an income delinquent. Students who are considered income delinquent cannot apply again to borrow money from Devry University after their third year of college.
In conclusion, there are several ways to falsify financial information in order to secure a low interest rate or false advertising forgiveness. The most common Devry University defrauds are misrepresentation of earnings and residency. The most important thing for students to remember is that these types of acts are considered fraud when it involves a financial institution. In terms of fraud, the falsifying of data is a felony and can carry a penalty of one year and four hundred thousand dollars. In the case of false advertising, the penalty can be as much as three times the original cost of the advertisement. The maximum fine in this instance is two thousand five hundred dollars.