On Thursday, the Legal Aid Foundation of Los Angeles and the National Consumer Law Center filed a lawsuit against the U.S. Department of Education and Secretary Betsy DeVos over the handling of student loans belonging to those who attended the now-closed Marinello Schools of Beauty.
In 2016, the Department of Education denied Marinello Schools of Beauty and several other for-profit schools eligibility for federal student aid. In response, all 56 beauty school campuses were shut down, leaving thousands of students scrambling to find a path forward.
Some students were able to eliminate their student loans through closed school discharge. However, others were unable to do so. The lawsuit claims the Department of Education wrongfully denied three students’ application for student loan discharge and that they are now unable to repay their debts.
If you’re affected by the closure of Marinello Schools of Beauty, here’s what you need to know about the lawsuit and how it could impact you.
Fraudulent issues behind Marinello Schools of Beauty
In 2016, the Department of Education found that the Marinello Schools of Beauty had partnered with another organization to issue fake high school diplomas so borrowers could take out student loans and enroll in the school.
As a result, the Department of Education ended access to federal aid for Marinello Schools of Beauty. The school consequently closed its doors nationwide.
In the lawsuit, three plaintiffs — Lizette Menendez, Lydia Luna, and Leonard Valdez — allege that their applications for student loan discharge were unlawfully denied.
The three plaintiffs say that their loans should be discharged because Marinello Schools of Beauty defrauded them into taking out student loans in the first place by issuing them fake high school diplomas. Without high school diplomas, the plaintiffs would have been ineligible for federal student aid.
Further, they claim that the Department of Education unlawfully delayed when a new regulation around false certification of student eligibility or unauthorized payment discharge would go into effect. This regulation clarifies loan discharge eligibility for student loan borrowers whose schools used fake high school diplomas to fraudulently certify their federal financial aid eligibility.
Attempts to discharge Department of Education student loans
Once Marinello Schools of Beauty closed, students and graduates were left with few options.
Students that were currently enrolled, or had left school within 120 days of its closure, were eligible for closed school discharge. Under this form of discharge, the government would forgive up to 100% of federal Direct or Perkins loans. If discharged, the debt was eliminated and borrowers no longer needed to make payments.
However, the three plaintiffs were not eligible for closed school discharge because they had graduated well before the schools closed.
Instead, the only way to get rid of their loans was to pursue false certification of student eligibility or unauthorized payment discharge. The plaintiffs allege that because Marinello Schools of Beauty worked to issue them fake diplomas, the school falsely submitted them as eligible for federal student aid.
The plaintiffs believe that they qualify for false certification discharge, but say that the government wrongfully denied their applications due to an outdated regulation.
“It is outrageous that the Education Department, which determined that Marinello used a phony high school diploma scheme to falsely certify student financial aid eligibility, has refused to comply with the law and grant loan discharges to harmed students,” said Robyn Smith, senior attorney at the Legal Aid Foundation of Los Angeles, in a press release. “These students, pawns in Marinello’s fraudulent scheme to increase its revenues, should not have to repay these loans.”
With the help of the Legal Aid Foundation, the three plaintiffs are asking the court to grant their applications for student loan discharge and to end debt collection efforts against them.
The Department of Education did not respond to requests for comment by this article’s deadline.
What the lawsuit means for you
Although the lawsuit only has three plaintiffs, it’s possible that there are other former Marinello Schools of Beauty students who are in the same situation.
If that’s the case for you, the Legal Aid Foundation of Los Angeles urges you to call 1-800-399-4528 for help.
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