NYLAG sues Secretary of Education for Failing to Notify Former Wilfred Students
Salazar v. DeVos
Wilfred American Education Corporation (Wilfred) was a national chain of for-profit trade schools that engaged in widespread fraud and went out of business in the early 1990s. Wilfred Schools were the subject of several federal investigations in the 1980s and 1990s, and the people who ran it were subsequently convicted of federal financial aid fraud. When a school has falsely certified that a particular student is eligible for student loans, students can quality for a “false certification discharge” that forgives and reimburses student loans disbursed after January 1, 1986. The false certification discharge includes what is known as the ability-to-benefit (ATB) discharge for students who did not have a high school diploma or G.E.D. and were not given or did not pass an approved ATB test, but were still certified by a school as eligible for federal student loans. Wilfred falsely certified thousands of students as being eligible for financial aid when they did not have a high school diploma or G.E.D., and did not pass an appropriate test.
In February 2014, NYLAG sued the US Department of Education (USED) because USED violated federal law by refusing to notify former Wilfred students that they may be eligible to seek discharge of their loans if Wilfred falsely certified them to take out those loans. In August 2017, the Court approved a settlement between USED and the thousands of former students, which required USED to notify these students that they may be able to get their loans canceled, bringing the possibility of millions of dollars of financial relief for the students. USED has estimated that over 61,300 federally guaranteed student loans were made to Wilfred School attendees. USED has also estimated that 60% of these borrowers were falsely certified by Wilfred as having the ability to benefit from Wilfred’s program, and should therefore be eligible to have their loans discharged.
Name: Salazar v. DeVos
Dkt. #: 14 Civ. 1230 (S.D.N.Y.2014)
Judge: Hon. Robert W. Sweet
Violation of the Administrative Procedure Act for failure to mail the required notice.
- July 28, 2013 – New York Times Article – Beauty School Students Left With Broken Promises and Large Debts
- February 25, 2014 – New York Times Article – Suit Seeks Relief for Trade School Students With Years of Debt but No Career
- Plaintiffs filed Complaint in February 2014 and Amended Complaint in May 2014
- District Court granted Defendant’s Motion to Dismiss Complaint and denied as moot Plaintiffs’ Motion for Class Certification in January 2015
- May 16, 2016 – New York Law Journal – Court Revives Suit Against U.S. Over Fraudulent Student Loans
- June 10, 2016 – New York Times Article – Woes for ITT, a For-Profit School, Bode Worse for Its Students
- Plaintiffs filed an Appeal and the Second Circuit vacated the District Court’s order, handing a significant victory to Plaintiffs in May 2019
- Parties engaged in extensive settlement negotiations and the United States District Court for the Southern District of New York approved a settlement agreement between USED and the thousands of former students
- August 9, 2017 – New York Times Article – U.S. to Help Remove Debt Burden for Students Defrauded by For-Profit Chain