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Lawsuit Seeks Debt Relief for Students of Defunct Trade School

A lawsuit filed in the U.S. District Court in Manhattan on Tuesday is seeking debt relief and reimbursement from the federal government for four former students of a defunct trade school, and potentially thousands of other students if the case is granted class-action status, The New York Times reported.

The suit contends that the government should stop trying to collect on loans that were given to students of the Wilfred Academy, a cosmetology school in Manhattan, because it was aware that the company routinely falsified student eligibility for the loans. The school was one of about 60 cosmetology and business trade schools run by the Wilfred American Educational Corporation, the last of which closed in 1994.

The named plaintiffs include Ana Salazar, a single mother of four who believed the Wilfred Academy’s promise of “everything you’ll need for your beauty career” was a ticket out of her minimum-wage job as a security guard.

Twenty-six years later, according to the Times, Ms. Salazar still doesn’t know how to cut hair. She is retired and living on government assistance, and still owes more than $16,000, with accumulated interest and fees, on a federally guaranteed loan that she obtained after the school enrolled her, even though she could not speak English, did not have a high-school diploma, and had not been given a test that examined her ability to benefit from the course—all requirements for her to be eligible for the loan.

Robyn Smith, a lawyer working with the National Consumer Law Center, said it was “outrageous” that the Education Department continued to collect on loans to low-income borrowers who were struggling financially because they were victims of a fraud.

Ms. Smith said the Wilfred case could set a precedent. “This is one bad school among many,” she said. “But it’s just the tip of the iceberg for what may be happening to a lot of other students.”

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