Law Schools

Some Charlotte School of Law students wrongly denied discharge of federal loans, NC AG's office says

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The Charlotte School of Law Facade

The Charlotte School of Law. ABA Journal file photo by Albert Dickson.

Dozens of former Charlotte School of Law students who were on approved leaves of absence when the law school closed in August were improperly denied closed-school loan discharge, according to the North Carolina attorney general’s office.

In a Dec. 13 letter (PDF) sent to Betsy DeVos, the U.S. Secretary of Education, Matt Liles, an assistant attorney general, wrote that an administrative error caused the situation, and more communication is needed between Charlotte School of Law, the National Student Clearinghouse and the National Student Loan Data System.

“Our office is committed to ensuring that former CSL students receive the student loan relief they deserve, and this error gives us serious concern about the accuracy of the closed-school discharge process. We therefore request a thorough explanation of what went wrong here,” Liles wrote. “We also ask that you explain what affirmative steps you have taken or plan to take to remedy this error. At a minimum, we think this should include the Department contacting all affected students, informing them of the error, and facilitating their reapplication for closed school discharge.”

The U.S. Department of Education announced in December 2016 that Charlotte School of Law would lose its federal student aid after finding that it made “substantial misrepresentations” to current and prospective students regarding its compliance with ABA accreditation standards. The announcement followed the law school being placed on probation (PDF) by the ABA in November 2016 for being out of compliance with accreditation standards regarding legal education programs and admissions.

Between December 2016 and August 2017, when the ABA denied Charlotte’s teach-out plan and the law school announced that it would close, various statements made by the school suggested that the loan money would be reinstated.

Liles’ letter asks that students attending Charlotte School of Law as of Dec. 19, 2016, be eligible for student loan discharge on grounds of “exceptional circumstances.” Traditionally, students are eligible for loan discharge if they were enrolled at a school when it closed, or withdrew within 120 days of a closure announcement, according to the Federal Student Aid website.

“Starting in December 2016, these students were in an extraordinary environment: a school that was continuing classes while being openly on the verge of closure,” Liles wrote.

A fact sheet (PDF) from the Department of Education states that 100 percent loan discharge is available to students enrolled at Charlotte when it closed, and those who withdrew on or after April 12, 2017. According to Liles, the department confirmed in a Sept. 22 letter that students on approved leaves of absence are eligible for closed-school discharge.

A Nov. 22 letter that Womble Bond Dickson, a law firm representing Charlotte School of Law, sent to the North Carolina attorney general’s office is included in the communication to DeVos. The letter states that after seeing Facebook posts that students who had been on approved leaves were being denied closed school discharge, an assistant dean contacted the National Student Clearinghouse, a nonprofit group that handles automated record verification for colleges. According to Womble Bond, the organization told the school that it considers students on leave to be withdrawn for student loan purposes, and that the school should contact the National Student Loan Data System.

Todd Sedmak, manager of corporate communications with the National Student Clearinghouse, told the ABA Journal that all the information about Charlotte School of Law it provided to the NSLDS has been provided by the school, or its representatives.

“We are reaching out to the Charlotte School of Law on this matter so that the errors provided to the National Student Clearinghouse are resolved. An error for example would be communicating that the Department of Education has an enrollment status called active and transfer,” he said. “In addition, we are talking with the U.S. Department of Education on the errors and misunderstandings that the school and their representatives need to resolve.”

The NSLDS reportedly told Charlotte School of Law that in order for students on leave to get closed-school loan discharge, their approved leave dates would need to be changed to something within the 120-day period of when the school closed, according to Womble Bond, and it was suggested that the date be changed to May 12.

“CSL believes that it has successfully identified and resolved the issue caused by leave-of-absence students having a ‘withdrawn’ status with Student Clearinghouse and NSLDS. CSL, however, cannot confirm the effectiveness of its corrective measures because CSL does not have the ability to submit or reprocess any student’s application for loan forgiveness,” Womble Bond wrote.

When contacted by the ABA Journal, Charlotte School of Law said that it has not received information from the Department of Education regarding student loan discharge decisions.

And on Dec. 14, a day after the North Carolina attorney general’s office shared a copy of its letter to DeVos with the media, Charlotte School of Law sent the department its own letter (PDF) “to continue to correct the record.”

Members of the media interpreted the North Carolina attorney general’s office letter as implying that the law school was at fault for the clerical error, Charlotte School of Law wrote to De Vos.

“The suggestion is odious. As we have demonstrated to the Department, the American Bar Association, and to the North Carolina Attorney-General on more than one occasion, the school’s actions have preserved the ability of students to pursue a closed-school discharge,” the letter reads.

Student loan discharge at for-profit law schools is uncharted territory, David J. Hickton, a former U.S. attorney, told the ABA Journal in November, after North Carolina U.S. Congress members urged DeVos to extend enrollment requirements for Charlotte School of Law students seeking school loan discharges.

“For-profit colleges exist because Congress funds them through Title IV of the Higher Education Act. If these for-profit colleges created egregious situations for students, which I believe is true, Congress is going to have to act, and they’re going to have to act beyond Charlotte School of Law and deal with the entire issue, in my opinion,” says Hickton, who was involved in the False Claims Act lawsuit against the Education Management Corp, which settled for $95.5 million in 2015.

Updated at 12:44 p.m. to include Dec. 14 letter from Charlotte School of Law to Betsy DeVos; Updated Dec. 15 with comment from the National Student Clearinghouse.

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