March 29, 2007

Details on the lawsuit against the Dept. of Education

Posted in Consolidation, Student Loan News, The Financial Aid Process at 9:26 AM by Joe From Boston


Here’s an article you all should read from the Forest Lake Times regarding the lawsuit against the Dept. of Education that began last week:

Frustration fuels local woman’s role in lawsuit

Cliff Buchan
News Editor

Dr. Brenda Pfeiffer wonders how many former students are in the same boat as she is when it comes to student-loan payments.

For 10 years she has wondered, but now the owner of Pfeiffer Chiropractic in Wyoming is hoping a legal challenge against the U.S. Department of Education will shed light on a federal system that she says is not right.

Pfeiffer, 41, made national news last week when she became the lead plaintiff in a class action suit filed against the DOE in federal court in Washington, D.C. The suit accuses the DOE of illegally charging late fees and interest payments against loan holders even though loan payments were made on time.

Pfeiffer sparked the lawsuit after several years of trying to talk to DOE officials about her situation with little satisfaction.

Now, as the suit enters its first phase, Pfeiffer wonders how many former students may be in the dark and unaware of the DOE’s billing system.

Pfeiffer’s story

A native of South Dakota, Pfeiffer went back to college to earn her doctorate of chiropractic after teaching mathematics. By the time she earned her chiropractic degree in 1994, she was faced with a $90,000 debt load.

She financed her post-graduate degree through the DOE’s Direct Loan Program and received funds for her education from the income contingent repayment plan, or ICR, she said this week.

Three years after graduation, she did what many college students do — she consolidated several college loans to ease the repayment schedule. There began the trouble, but it took Pfeiffer several years to figure it out.

Under the loan payment plan, Pfeiffer’s monthly payment date was on the 21st. According to the suit, she made payments on time and sometimes early.

However, the DOE attached a penalty to Pfeiffer for not making a separate payment for the time between June 21 and June 30, even though her next payment was not due until July 21. In her case, that meant a penalty attached from June 21. And in fact, she said, the penalty was capitalized and added to the principal of the loan.

It was the ever-growing year-end balances that triggered Pfeiffer’s alarm.

“I started investigating it in 2002,” she said. “I didn’t discover it at first.”

But after hours of review, second reviews and mathematical calculations, she finally understood what was happening.

“This thing took me a while to pull out,” Pfeiffer said. “I spent a lot of hours trying to determine where that money was coming from.”

Over months and months, she wrote and called DOE officials to point out the problem and argue that she was being unfairly penalized by the system.

During the course of her talks with the DOE, Pfeiffer says she was told that it was a computer misstep and that it shouldn’t happen. But yet the problem continued.

After numerous conversations with the DOE, Pfeiffer said she was left with the frustration that the federal agency would take no action because “‘That’s the way the system is.’”

The frustration swelled, she said, because she had acted in good faith to point out the problem. “Why they wouldn’t change it, I don’t know,” she said.

When Pfeiffer finally sought legal help in 2005, she was convinced that the DOE was “going to do it again and again.”

Pfeiffer says in the suit that over the past five years more than $1000 was incorrectly billed to her. She will be required to pay interest on that sum over the life of the loan if the issue is not resolved, she says.

Pfeiffer says students should be able to place trust in federal loan programs, but when situations like this arise, the trust is breached.

The case

According to the suit, the DOE computer billing system may have caused more than 3 million student loan holders to be charged hundreds of millions of dollars more than they owed. The suit contends the DOE is breaking the law in doing so.

The suit contends that the complex billing system used by DOE has impacted students and former students with consolidated loans that total more than $72 billion.

Mara Thompson, an attorney with Sprenger & Lang, which has offices in Washington and Minneapolis, said Monday there has been no response yet from the DOE.

If the education department wants to litigate the issue, Thompson said it could take more than two years to resolve the case. “If that is the case it will take that long,” she said.

The suit calls on the DOE to end the billing practice and return the money it incorrectly billed to student loan holders.

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21 Comments »

  1. When someone writes an article he/she maintains
    the idea of a user in his/her brain that how a user can be aware of it.
    Therefore that’s why this paragraph is amazing. Thanks!

  2. ronster2970@yahoo.com said,

    Dept of Education, and the studant loan program is a scam,…along with fed loans…

  3. Hi Maureen,

    If I were in your shoes, I would either call a lawyer or contact all my Senators/Representatives. If you have proof the first loan was discharged in court, you should not have had to pay it back later. It’s time to get some professional legal advice or the help of a government official who represents you in Congress. Their staff may be able to help mediate the dispute and correct the problem.

  4. Maureen Tobin said,

    I also have an ongoing issue with the Dept of Education. My student loan was taken in 1985 and discharged in a Chapter 13 when student loans were dischargable under the 7 year rule. Ten years after the loan was discharged the Dept of Education came out of the woodwork and claimed the $4,000.00 loan was now 12,000.00 and even though no contact or attempt to collect was made over the ten years, they silently accrued interest and now demanded the loan be paid in full forthwith. Despite my written response and copies of promissory note with 1985 date and copy of the 7 year rule, the DOE started a garnishment against me. I finally gave in and took a mortagage on my house to pay them the full amt. asked for. They delayed in stopping my garnishment and continued to collect more. Now when I call to get my overpayment back, I can never connect with a person and they do not return my calls. My employer also called on my behalf and their calls were not returned. Seems to be like the third world countries where the government can claim or take anything and the people have no recourse.

  5. Well, Tracy, they are allowed to garnish wages and social security for failure to pay.

    If, as you say, they kept telling you not to pay for a time, call them back and ask why your payments were put on hold and demand copies of paperwork regarding all this. I’m not a lawyer, so I don’t know if you have a case or not. But you can definitely report them to the Better Business Bureau!

  6. Tracy said,

    Heres what they did to me, i have been paying for my student loan since 1988, what would happen is Ill be paying my monthly payments then all of a sudden the payment coupons wouild quit comming, so i would call and ask why they didnt send the payment coupon. They said dont worry about it there going through new program, this happend to me 5 or 6 diffrent times. so what would happen is id pay for 6 months and i wouldnt hear from them for 2 to 4 years, during that time the intrest is collecting, get this I took out only a $2,500.00 dollar loan from theam and have paid close to $ 10,000.00 to them, now they have gARNISHED MY SOCIAL SECURITY and take all my Tax refunds and any kind of aa stimulous package and i have been paying my payments on time, but they felt it wasnt enough so they uped and took part of my Soical Security, and now i may end up homeless due to this and they didnt care, I couldnt believe how cold this asswholes are. i was wondering if there is something i can do , i havent even had my voice heard on any of this, i didnt get to go to court or anything. Just wondering if anyone knows what i can do.

    Tracy

  7. Diana Wade said,

    My payments were not getting credited and and my attorney or I could get no where for years and years as they have been taking my refunds for 30 years and have applied nothing to principal or penalities. I paid my student loans 10 times over. They ruined my life, my education did me no good as employers looked at my credit with the defaulted loans on them. I always had to settle for a job with peers of no education and to have my pay checks shared with student loans. As a single parent my child and I sat in the dark on cold winters with nothing to eat because of poor jobs over this with a large hunk of the paycheck going to students loans that never would apply the monies. My credit for years was shit and now they will be taking all of my social security. Forget trying to work with them or communicate, I have are the stories. It is impossible to believe that this is the United States when dealing with this agency for 30 years. This is a call center environment. These people are as good as trained monkies. They behave as if they have had no more than 2 weeks training, off the street. One bragged about the hefty commission he makes and he does not even have to apply the credit to my account. He said he willl make his money and leave. Which is probably why you talk to a different person every time and there are never any notes. Apparantly this is standard operating procedure as this has been going on for 30 years. The student loan program has ruined my life. I had a senator call them and I got no where.

  8. Jacqueline Leo said,

    I am also going threw this as well I have had them take my husbands state refund from 1987 threw 2002 also paying them on and off on my own. I was a victim a of a fraudulent school, that was shut down back in 1985 and the owners of the school filed bankruptcy. I also spoke with a lawyer and I was told because they claimed bankruptcy I could not do anything .They said I owed 2500.00 I have no idea until I actually add it up how much I have paid them but, I just received a letter in the mail today saying I still owe 1288.00. They also take anything else that we would receive from the government as far as the I believe it is called stimulus package? I wish I could get into this lawsuit as well they just took half off the family stimulus off 750.00 ,300.00 the year before and I am sure they will take anything else I am in New York and looking for an Attorney for that class action suit.

  9. w. jenkins said,

    8/16/2008

    I am Jenkins

    Looking for the class-action suit of Dr. Brenda Pfeiffer. I would like to join that case as a Plaintiff. My Problems: Encouraged by National University Officials in Sacramento California to taken out a loans in 1987 for the amount about $5,500.00 with no strings attached, I was led to believe. As of this date I had my wife and my tax taken every year from 1989 until now. And EDFUND have attached any and all Federal funds due me. As of this date I have paid over $25,000.00 and now I am told I still owe about $7,600.00. Steaming in Louisiana and looking for an Attorney for that class action suit.

    • jim barber said,

      same case 1985 borrowed 5,500 .. the loan has been sold 4-5 times and as of today i still owe 8,000 and i pay 105.00 each month . they said i still owed this and i said bull shit . so i stopped paying for 4 months and thats when they put garnishment on my wages. there is no way i still owe anything on this loan that is over 25 years old . but what can you do except pay the monthly fee till i die. thank you uncle sam..

    • Leah said,

      you have to get an attorney at fight the IRS at this point. Same thing occured to my uncle. They overcharged him $30,000. A lawsuit will eventually get you your money back and you account cleared with the IRS so that any future refunds will be completely yours!

  10. Have you though about writing to your Senators or Representatives? They’re probably not aware of what you’re going through. If enough constituents complain in a short period of time, they’ll have no choice but to respond.

    Even if you’re the only one who complains, they may still be able to help you. I have a friend who works for a Congressman, and she helps people with all sorts of situations.

  11. Ceci said,

    My fiance is going through a similar situation. He is a victim of a fraudulent school, that was shut down back in 1987 and the owners of the school were indicted & convicted of fraud. This was a huge case fought in the US District Court for the Southern District of NY, that made big news in NYC.
    Still with proof that his student loan should be discharged since he was not able to benefit and attorneys still fighting this case for other student victims of this school, DOE will not respond to our attorney’s letters or even acknowledge receipt of them (even though we have certified/return receipts with signatures from the DOE.
    The DOE still offsets his tax returns. So even with an attorney it’s hard to get a response.
    I’ve read many stories of people who have very similar situations with the DOE. In my opinion, This issue needs to be expose through the media and get as many people on board to shed light on this issue. There needs to be a change in the system that is scamming innocent people. It is not right what they are doing to people who try to get an education, work hard for their money, just so the DOE can just ABUSE and take advantage of them.
    It doesn’t matter to DOE that you have “rights” b/c they have an advantage over you, easy access to your hard earned money. Regardless if you have proof and paperwork and that you have gone through all the necessary procedures to get your issue resolved, DOE always manages to say we “never received anything, send it again then call in a couple of days to see if we received it.” You do this again & you’re back at square one, with no authority or Person in charge of the dept. It’s frustrating & ridiculous.

    • janice said,

      I to owe for a student loan from 1989. The thing is I was going to be a CNA and when the course was over our certificates were no good. They have taken so many of my income tax checks. But I dont think that I should have to pay since I took the course for nothing. I had to go somewhere to get certified. Do you know how far back they can go before they stop taking my money? Please let me know if you know the answer…

      • Hi Janice,

        As far as I know, there is no statute of limitations on repaying students loans, but you can always contact a lawyer to learn for certain.

        Regarding your school, if the school closed and you couldn’t finish your training, then you can get your loans discharged, but you can’t get them discharged for being unhappy with the quality of education. If you want all the details, go here: http://studentaid.ed.gov/PORTALSWebApp/students/english/discharges.jsp?tab=repaying

  12. Heidi,

    I don’t have much advice to give you, but if I were in y our shoes with court documents to prove that I’d paid my loans, I would consult a lawyer as the garnishing of your tax refund was thus illegal.

  13. Heidi said,

    Ms Pfeiffer;
    I am going through almost the same thing you are. I have been dealing with this now since 2002 and at my wits end! They claim I owe them more money. I have court documents that provide proof that my account has been paid, as well as letters from the company stating that my loans have been paid. I have spent countless hours on the phone trying to resolve this, faxing my proof and information over and over again (which 90% of the time they never “receive”). Now they have taken my tax reund as well as my husbands (we were not married when this problem evolved). I have been tormented now for years. I am hoping maybe you can steer in the right direction. I am truly sorry for what you have gone through but I am glad to know I am not the only one.
    Thank you for you time
    Heidi

  14. Mary,

    I’m no legal expert, but if you think you’ve been targeted illegally, then you should consult a lawyer. I should point out that it is legal for Sallie Mae or any other lender to charge high fees for defaulted loans or missed payments – as frustrating as it is, that’s within their rights currently.

  15. Mary said,

    I believe i’m being ripped off just like Brenda Pfeiffer. I need to know who to contact now. Please help. Thaks.

  16. Mark said,

    Good for her. Student loans are the biggest rip off going

  17. dan k said,

    interesting article
    hope you dont mind me bookmarking


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