Student debt forgiveness: 'Tricked’ sales class grads to get over $30 million
Tens of millions of dollars in debt relief are about to flow toward graduates of a 12-week sales bootcamp that the federal government says spent years luring students into agreeing to illegal and predatory loans with promises of six-figure salaries and guaranteed jobs.
A court order signed Monday by a Delaware bankruptcy judge requires Prehired, a self-described workforce accelerator, to shut down permanently and provide more than $30 million total in debt forgiveness to hundreds of former customers. Those customers, according to the Consumer Financial Protection Bureau, were “kept in the dark” about key loan information and “tricked” with deceptive debt collection practices.
The federal agency announced the court order on Monday along with 11 state attorneys general, who jointly sued Prehired and its affiliated companies in July over its business practices.
“Prehired lured student borrowers into debt with false promises of job placements and claims that students wouldn’t have to pay until they got a job,” CFPB Director Rohit Chopra said in a statement. “Today’s action with our state partners ensures that borrowers harmed by Prehired can receive redress and have their illegal loans canceled.”
The litigation is yet another blemish on the largely maligned legacy of a once-innovative financial aid practice known as income-share agreements, which were for a short time trumpeted by some as a potential remedy to America’s crippling student loan crisis.
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The concept was relatively simple: Colleges or training programs would pay students up front to attend school. In exchange, those students would eventually share a small portion of their earnings with their lenders. But the experiment was quickly tainted by predatory business practices and has since mostly buckled under waves of litigation, much of which has been filed on consumer protection grounds.
According to the CFPB, Prehired charged up to $30,000 for its three-month bootcamp program. For students who couldn’t afford to pay the money, the company urged them to enter into income-share loans, and then falsely promised they’d have to pay nothing back on those loans until they made at least $60,000 a year, according to the CFPB.
Between January 2018 and April 2022, hundreds of students enrolled in Prehired’s program, according to court documents. More than 1,000 entered into income-share agreements.
The CFPB says Prehired then transferred those loans to its affiliated companies and tried to collect the debt “in a distant forum when the consumers did not live in that forum and were not physically present in that forum.”
Prehired “demanded and collected payments, pursued debt collection actions by filing in a distant and not appropriately disclosed forum, and misled consumers into signing settlement agreements that had little benefit for consumers,” according to court documents.
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Judge John Dorsey signed the stipulated judgment, which requires Prehired to refund more than $4 million to student borrowers who made payments on income-share loans between May 2019 and March 2023.
All their outstanding loans, which were valued at nearly $27 million, were also canceled.
The company’s bankruptcy trustee and his lawyer did not immediately respond to a request for comment Tuesday.
Zachary Schermele is a breaking news and education reporter for Paste BN. You can reach him by email at zschermele@usatoday.com. Follow him on X at @ZachSchermele.