I have a first year college student who applied for student loans along with us receiving loan revenue for his schooling. He attended school as a full time student but after completing his full year decided that this school was not where he wanted to be and is now transferring to another college. But while attending this $30,000 +/year college, he failed several of his classes. The college received full payment for the year from all sources by January of this year. But on May 22, 2012 decided to return some of the financial aid money back to the provider and is now demanding payment from him for money owed. But to make matters worse, on June 14, 2012 the billing was turned over to a collection agency. Our son was unaware of this practice and was never contacted prior. We received the statement in the mail first week of June showing the balance owed and then received the collection letter one week later, there was no time to respond to their demand for payment. We had received previous statements for payment in full and no money was owed. I should add that our son, was embarrassed to bring this to our attention and we were not aware of this situation until yesterday. Can a school return loan proceeds for services rendered? We made an agreement to pay the loan with the loan provider...the school already got paid for their services. Can they then turn around and demand payment from us when they had already had payment and choose to return it? I look forward to hearing from you soon, thanks! Lisa
Hello. My name is XXXX XXX I will be happy to answer your question.I am sorry to hear about your unfortunate situation.Unfortunately, the college that received federal funding is required to return any federal loans proceeds if the student does fail some of his classes or fails to maintain a 2.00 GPA.In this case, your son would be personally responsible for the cost of the tuition that he had received and unfortunately also when he signed enrollment documents and financial aid documents, most colleges would have this provision included in one of the documents.At this point, your son can try to negotiate a settlement with the collection agency or his other option would be to declare chapter 7 bankruptcy, if he is otherwise qualified, as this would be considered a tuition debt and not student loan debt and the debt would be dischargerable in chapter 7 bankruptcy.I know this is not an answer you were hoping for, but please do understand that I do have professional obligation to provide JustAnswer.com customers with correct answers, even if the answer is not favorable to the customer.
Dear XXXX,Do you have any related follow up questions or do you need for me to further explain my answer to you?
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