Settlement will wipe $6 billion in student loan debt — but not for these borrowers

Last month, when more than 200,000 students who had been victims of misconduct by their colleges began getting the news that their federal student loans were cancelled, Amanda Luciano felt a sense of satisfaction — and a pang of despair.

After Luciano graduated from high school, she initially enrolled at nearby Joliet Junior College, unsure exactly what she wanted to do but interested in teaching. She kept her job at her local Big Lots, where she had worked during high school. Living at home, she scheduled her classes for the morning and often worked a 1-9 p.m. shift. She was able to earn enough to pay the Joliet tuition out of pocket.

During her third semester, she took a class on fashion merchandising and fell in love with it. She felt like she had found her calling, she said, but there weren’t many classes in fashion at Joliet. That’s when she went online to see whether it was possible to get a degree in fashion and found IADT promising exactly that — just a train ride away.

She visited the school and an admissions representative repeated what the website had promised: Getting a degree from IADT would lead to a career as a buyer, a fashion designer or a virtual merchandizer, depending on which track she chose.

“They literally listed what would be available to us. They made it seem like, get this degree and here are the jobs you can have,” Luciano said. “So of course, I was like, this sounds perfect.”

Luciano says the financial aid officer at IADT never mentioned the option of federal loans and told her that a private loan was her best option since it would also give her money for living expenses.

“My thinking was, this is kind of what you needed to do — get a college degree to get a well-paying job,” she said.

Luciano’s interest rate is now over 9 percent and is not fixed, so it has risen and fallen over the years. The current interest rate on federal student loans is 5 percent, and once a student borrows, it doesn’t change over time.

Related: As the Supreme Court hears arguments on student loan forgiveness, three experts explain what’s at stake

After Luciano graduated from IADT in 2008, she searched for jobs in the fashion industry for several years.

IADT “promised networking opportunities, high paying jobs within our industry, even internship opportunities that lead to positions within the industry,” she recalled.

She contacted the school’s career services office at least once a week, she said, but they only sent her job listings easily found on any job website.

The bachelor’s degree she earned from the International Academy of Design and Technology in 2008 proved worthless to Amanda Luciano (then Amanda Ward) in seeking fashion- industry jobs she had been training for. Credit: Camilla Forte/ The Hechinger Report

“I never thought to question the school in why this was all happening,” she said. “I just thought I needed to try harder, keep searching.”

She looked for jobs at stores with nearby corporate headquarters, constantly checking their websites to see if they were hiring, but positions were few and far between. She had one interview at the retail giant Claire’s for a buying position, but they were looking for someone with more experience.

In three years of searching, she never landed anything more than a $13-an-hour job at the retail store Kohl’s as an apparel supervisor, which did not require a degree.

“That was all I could find on the job boards,” she said. “I kept reaching back out to the school, but there was nothing. I finally realized this degree was worth absolutely nothing.”

Related: The unasked question about the student loan bailout: What’s colleges’ responsibility?

She moved back home with her mom and eventually decided to cut her losses. In 2011, she enrolled at the College of DuPage — a nearby community college — and became certified to teach preschool. She took out federal student loans to pay for the program.

“It was just so demoralizing,” she said. “And then to find out that this school — my school — was part of this predatory scam. After hearing that, I just can’t believe I’m still paying for it.”

In 2012, when Luciano started teaching preschool, the median annual salary for IADT graduates in Chicago was just $25,000 ten years after graduating, and more than half of students with federal loans were either delinquent or in default five years after starting repayment. In 2015, eight out of ten of the college’s bachelor’s degree programs failed the government’s “gainful employment” test — a measurement that looks at whether students, on average, are earning enough to repay their loans. In 2017, the year the college closed, 75 percent of its students with federal loans were delinquent or in default.

Those borrowers — the ones with federal loans — are getting relief from the Sweet settlement, and while the wait has been long, they got a break during the pandemic. They haven’t had to make payments since March 2020, and no interest has been added since then. Luciano, whose private loans are held by Navient, was allowed an 18-month pause, but her interest kept building up during that time. The company offers forbearances for economic hardships, but Luciano used up what was available when her son, now 6 years old, was born prematurely and she couldn’t work full-time.

A Navient representative declined to comment on Luciano’s situation, citing privacy concerns, and said that individuals with private loans who are facing repayment challenges should contact their servicers to inquire about available options.

Connor, of the Project on Predatory Student Lending, says she is looking into ways to help students like Luciano.

Meanwhile, Luciano, now a mom of two, has watched her fellow students from IATD posting images on Facebook of the emails they received alerting them to full loan cancellation.

“I’m so regretful, every day,” she said. “I just keep paying, but I’ll never be rid of it.”

This story about private loan forgiveness was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for our higher education newsletter.

The post Settlement will wipe $6 billion in student loan debt — but not for these borrowers appeared first on The Hechinger Report.

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