laws pertaining to contracts

[beth_parr]

What is the name of your state (only U.S. law)? Michigan.
In 2011 I took out a loan and received a grant for school under the title 4 financial aid.
I withdrew early from school and received a bill for over $2005
When I talked to a finance person at the school I asked the amounts they received, the amount they sent back to lender, the amount that was refunded to me, the cost of tuition fees & books.
The amount they received and kept covered all tuition, fees, & books. And I am in repayment with the lender for those costs.
The break down of costs are as follows.
Tuition books $ fees =$3050
Money received and kept by school=$4568
Excess money given to me=$3994
Money returned to lender=$2476
Bill from school=$2005

What I am trying to understand is that when a student withdrawals early a calculation is used to decide how much fed aid the student earned. You earn the fed aid by attending class. If you have attended 60% of the enrollment period you are entitled to 100% of fed aid. If you have attended less than 60% the school has to tell you what you have earned and what you havent and have to to pay back to fed aid according to the promissory note you signed with lender. The school also has to send a % back according to what the calculation shows.

In my case it seems that the school took it upon themselves to return my % due back to fed aid along with their % and have turned around and billed me according to their terms. Which is pay up or have credit score destroyed and get taken to court.

The terms on my promissory note are much more reasonable.

I never gave the school authorization to pay my portion for me. I feel as if they just took my contract with fed aid right out from under me.

I also am skeptical about the calculation the school did. Enrollment period was from April 4 till June 9. 70 days long. My withdrawal date was may 11. Which is 63% attendance. So I should have earned 100% and nothing should have been returned to lender.

Is there a law that says if a person has a loan with a lender that is in good standing..that another person can't come in and pay the balance (without being asked to do so and without a contract)and then turn around and say you owe me now!!

Like I can't go pay my neighbors mortgage off and then tell my neighbor pay me or else.

Am I missing something here? Any advice help direction is GREATLY appreciated !

 

[justalayman]

Is there a law that says if a person has a loan with a lender that is in good standing..that another person can't come in and pay the balance (without being asked to do so and without a contract)and then turn around and say you owe me now!!

no. If it is in the contract, it is so but there is no law preventing it. It happens all the time with things like mortgages. They are regularly sold to other investors who become the new creditor.

as to the percentage thing: no idea.

 

[beth_parr]

Thank you. I can understand my loan being sold to another bank. But the stipulations of my promissory note, wouldn't change without me agreeing to new terms.
So interest rate, time to pay, and since this is title 4 Federal aid it would still fall under the laws regulating such funds. Like deferment and forbearance and the various payment plans offered by the depth of ed.

The school has paid my loan without my permission and is demanding payment in full, think they gave me 30 days to pay them.

So something doesn't add up.

 

[ecmst12]

If you withdraw from classes, you no longer qualify for the student loans. The school is required by law to return that money to the government.

 

[beth_parr]

Just incase anyone ever needs the same info.....according to the higher education ammendments of 1998 (and this only covers loans and grants that fall under federal title 4 funds Luke pell, Stafford, direct and so on) if a person withdraws from school, what has to be returned to the lender is determined by attendance during the enrollment period. If a student attends 60% or more of the enrollment period they have earned 100% of their title 4 funds and no return of funds is sent back to the lender. If the student attends less than 60% then they have only earned an amount equal to whatever percentage they attended. So if you attend 30% you earned 30% out of the total funds for that enrollment period and the rest gets sent back to the lender.

The unfortunate thing is some not so good colleges are returning 100% of funds even when a student has earned 100% and then billing the student privately. This is illegal but very few people seem to be aware and just take the colleges word for it. The reason colleges are doing this is to keep their default rate down. Withdraw students are a high risk group and many default on their student loan terms. If a schools default rate goes above 10% the school then loses the oppertunity to participate (and receive) federal funding from students. So to lessen the rusk of loseing their bread and butter...they are cheating students out of money.

Gotta love for profit colleges!
I hope people start to really question bills from schools.

 

[OHRoadwarrior]

The terms regarding amounts that need to be returned to the lender are contractual in nature, as is your contract with the school. Their requirement to return government supplied/guaranteed funds, does not negate your contract with them, which is subject to different terms. I suggest you read the schools add/drop and withdraw policies, to see what financial agreements you agreed to, by your attendance there.