Extreme Life Circumstances Demand Extreme Solutions
Forty years ago, a U.S. Armed Forces veteran survived a life-threatening car accident that caused permanent mental, physical, and emotional disability. Three years after the accident, the borrower attempted to get his life back on track. Taking out a $1,500 federal student loan, he enrolled in a vocational program at a proprietary institution. But after just a few short weeks of classes, continuing medical problems caused him to undergo additional surgery and cut his education short. The school, however, kept the loan money. The borrower, since he had neither the money nor a complete education and was still disabled, assumed that the loan was cancelled. The loan subsequently defaulted.
Fast forward to last year—The borrower, who was living in a state-run soldier’s home, was being taken to court over the defaulted loan balance, which had now grown due to additional fees. His disability had progressed even further in the years since he originally took out the loan. With the permission of the borrower, a case manager at the soldiers’ home wrote to American Student Assistance®, the guarantor of the borrower’s loan, to make clear the veteran’s situation and file an “Inability to Benefit Waiver” of his debt. ASA recognized the extraordinary medical circumstances of this case and granted a general amnesty on repayment of the outstanding balance. The account is considered closed as settled for less than the full balance.
The mediation of the case manager helped resolve this long-standing default, says Christopher Callanan, ASA litigation associate. “The borrower’s psychological and emotional problems were preventing him from fully explaining his circumstances to us, so having the case manager act as a 3rd-party negotiator on his behalf brought about a faster resolution.”
“There were so many out-of-the-ordinary facts and questions surrounding this situation,” Callanan continues. “For example, there is some question as to why the loan was not canceled when the borrower withdrew from class. But the age of this case is an obstacle. First, the school is no longer in business. Second, 35 years ago the federal student loan program was still in its infancy. The regulations that now protect borrowers and lenders from fraud were not as clearly defined. However, regardless of the prior history, the reality today was that the borrower was simply unable to repay the loan.”
“We recognize that sometimes there are exceptional conditions, not addressed in the typical student loan process, that prohibit a borrower from meeting his obligation,” explains Grace Bartini, ASA Ombudsman. “In rare instances over the years, ASA has granted amnesty to give borrowers a fresh start. When it’s warranted, amnesty can make a real difference in the life of a borrower who’s struggling.”
