Wednesday, May 27, 2009

Best in Class, national coverage

Today's New York Times reports on the collapse of Kentucky's Best in Class loan forgiveness program for teachers in shortage fields, putting names and faces to the sad story and linking it to troubles in other places.

Do read the whole piece (here). It's painful and important reading.

Don't, however, take lightly the report that Ted Franzeim, head of customer relations for the Student Loan People "added that the group had never told participants that financing for forgiveness was guaranteed."

That is not true.

The program was presented all over the state as an incentive to borrow from Mr. Franzeim's organization. As an example, here's a clip from their executive director's 2002 legislative testimony:

More proof that the Student Loan People described Best in Class as a promise students could depend on is here, here, and here.

Either Best in Class was an honest promise or it was a trick to lure in borrowers. That second option is terrible to think about: dishonest incentives to student borrowers are forbidden by federal law and warrant major enforcement action by the federal Education Department.

I don't think Best in Class was a trick or a lure. I think it was a promise, made when the Student Loan People believed they would be able to afford to keep their word. The dishonest part is happening now, when they claim they made no promises and offered no guarantees.


  1. This program has created a financial nightmare for my family and it helps to know that someone is reporting the facts. This program promised 20% loan repayment after each year of teaching. My loan total is just over $60,000 and I was given only $930 in repayment benefits last year. That hardly amounts to the 20% I was promised. I am not the type of person that carelessly borrows money either. My only debt is my house and these outrageous school loans. We are only interested in getting what was promised to us when this program began. Thank you for your continued support. Any exposure we can get is a step in the right direction.

  2. Susan,

    Thanks again for highlighting this issue and for including both the legislative testimony and Department of Education’s ability to come to our aid. One of your earlier posts was also correct in saying that both the state and KHEAA need to come clean and own up to the problem before it can be solved. We are not asking for a bailout, only to receive what was promised to us. We are happy to continue serving as educators, but it is only fair for lenders to follow through with their promises.

    KHEAA’s bankers are still getting their premiums, while the borrowers are forced to pay a bill they were promised would be forgiven. It is a shame that many commenting on the NYT article do not truly understand that this was a promise and promises are meant to be fulfilled. Blogs like this one will surely help to educate people about what really happened. Thanks again. You have more accurately depicted and investigated this issue than any other media outlet. The NYT and many others should take lessons from you.

  3. Thanks again for shedding light on this matter. This program has left many teachers, including myself, with unforseen financial hardship. The Best in Class program was used as an incentive to recruit new teachers into fields like Special Education, Math, and more. What was considered to be a blessing when I started my Master's degree in Special Education has now become a monthly nightmare. I have never lived above my means so when the repayments began I tightened the family budget even more. I have yet to experience a year when the program actually fulfilled it's promise with the 20% forgiveness. The first year I was given about a 15% percent reduction. Although it wasn't the 20% that was promised it was still a welcomed coming. The second year it was less than 1% forgiven. When I contacted The Student Loan People they referred me to the Department of Education. The Dept. of Ed repeatedly told me that I would have to take up this matter with my lender. It's been a year and still no answers are coming but the bills are. This became even more crushing when my husband was laid off from his job in January. Our budget continues to tighten. I will not default on my loan because I keep my promises. I will continue to teach for more than five years-- again because that was the promise I made. Please continue to investigate this matter and bring Kentucky teachers justice in this matter.

  4. Thank you for helping us with our problem. I don't want a bailout, I just want what was promised to me. I am fulfilling my promise to the State of Kentucky by working with the Special Needs Population and help them become successful citizens for Kentucky - they need to fulfill theirs to me. I am now financially strapped and looking at bankruptcy - I never thought paying back these loans would be an issue. I was told by Dr. Joe McCormick who was the CEO of the Student Loan People back in 2004 to take all that I could borrow because I would never pay back a penny - they would pay everything back for me. He never said that this benefit would be taken away, and why should I question the CEO of the company? Thank you once again in helping us with our cause.

  5. I was told that my loan was not guaranteed, but was told there was so much money in the fund there was no way it would run out! I was also told KY teachers do not pay interest on their loans. I was even encouraged to borrow more than I needed for school to pay off other loans. That was definitely not true.

  6. None of that amounts to a "promise" or "guarantee". All that matters is the text of the contract that they signed. "Fine print" is a very real part of any contract, not a scheme to con people. It really speaks of people's mentality these days that contracts are viewed as duplicitous fine print that shouldn't be taken seriously or honored because after all, who reads the fine print? I guarantee you the language in the contract contrasted starkly with the sales pitch. If they had read the contract, they probably wouldn't be in the humiliating position they're in now. Besides, even WITH forgiveness, don't you think it would've been prudent to wait the measly 5 years it would've taken to be completely debt-free before mortgaging the next 30 years of their life?

  7. There was no discussion of the interest rate, length of the loan, repayment schedule, penalties for lateness, prepayment options or any other terms of the loan when I borrowed about $40,000. No financial information about me was required to see if I would be able to repay the loan. How is any of this full and fair disclosure? How can these be considered reasonable lending practices?

  8. Anon,

    Not all contracts are created by two signatures on paper. In court, a contract is defined by an offer and acceptance. The documents I've posted here may well qualify as an offer, and the teachers' performance as as acceptance.

    Separate from contracts as such, there's the legal doctrine of reliance. The Student Loan People most certainly advertised their plans knowing full well that teachers would rely on them. It's good old fashioned Anglo-Saxon common law to say that when actively coax someone into relying on you, you may get forced to be reliable.

    Separate from contracts and reliance, there's federal law about inducing people to take out loans. The Student Loan People used the program as a reason why teachers should borrow from them rather than any other lender. They put that in print, over and over. If they offered those inducements without sincere intent and serious plans to pay up, that's a serious problem.

    Even if there were no law at issue, there's honor at stake here. Respectable people do not talk other people into giant debt and then walk away.

    Finally, I urge you to start at and read all the comments. The teachers who have written in checked every angle possible. From every angle, the Student Loan People offered them an unambiguous commitment. The teachers did not miss fine print or engage in wishful thinking: they did the research and they understood accurately what was being offered.

  9. I am amazed at the credulity of those who are complaining. Everything I got from the Student Loan People said that the benefits could be discontinued at any time for any reason. I'm not happy about not getting my 20% each year, but I realize the blame lies on Congress. I went into teaching knowing that this was a good deal as long as it lasted -- but fully aware that it might not last.

  10. Actually, the Student Loan People had multiple financial problems in sequence. First, the Kentucky legislature took millions from their reserves. Second, they lost millions in federal subsidy revenue from the pre-1993 bonds because they did not show the Secretary that the related loans were eligible. Third, Congress changed the fees, and fourth and finally, the whole credit market broke down last year. They didn't cancel the program for future borrowing until last spring, when that last element here. There's a long, detailed post on the story at , and I hope you'll give it a look.

    Still I'm glad to hear at last from a teacher who did get accurate information. Do you by any chance have copies of some of those documents? I haven't seen the versions that took that care.

  11. Susan,

    Thanks for addressing this commenter. I do not believe the commenter to be a teacher, however. If so, then I would like to talk with this teacher. These comments actually read like a KHEAA rep to me. Come on, still trying to blame college and CCRAA for this mess. I'm sure he/she will send you some nice brochures with a cute little disclaimer, Susan.

    Anyway, I would say the testimonies of these teachers and your research, Susan, is far more credible than a few nice brochures and a sketchy loan corporation.

  12. Thank you Susan for continuing to bring this issue to the public.

    As an educated person, I understand the economy and a balanced budget are important. As an ethical person, I believe that when a promise is made, it should followed through to completion. I was very excited when I heard about the Best in Class program for special education teachers. It sounded too good to be true.

    So before jumping on the bandwagon, my husband contacted The Student Loan People directed and spoke to them extensively over the phone about the program and asked many questions. He spoke with one of their representative for almost an hour to make sure he understood all aspects of the program.

    At the end of the conversation he was told that the benefits of the Best in Class program would always be available as long as I was teaching special education. We could even consolidate his loans in with my mine, he is also an educator, and as long as I continued to teach special education, they would forgive 20% a year.

    The phone operator even went on to talk about once we had children and they were in college, if I was still teaching special education, the Best in Class program would forgive those loans at a rate of 20% a year. Since we didn’t have any children yet (and the operator was made aware of this through the discussions), this led us to believe in the longevity of the program. This was guaranteed.

    Through these guarantees my husband and I decided to continue our education. Before we began this journey, one of the professors asked us how we would be able to afford to complete this program together. We explained to him the Best in Class program. He looked into it as well and was enthusiastic for us and even referred the program to other possible educators.

    Then the wind was knocked out of our sails when we received a letter that no new loans as of last summer would be eligible and that they would continue to do their best to support the program and the promises made before that time. Yes, we received a little over $900 of forgiveness, but not what was guaranteed.

    Now my husband and I face almost $700 a month in school loan payments and we aren't finished yet. We have always been fiscally responsible. We pay all bills on time or early. We live within our means, but this additional unplanned for expense could be a breaking point for us. We would have made different educational choices if this program had not been guaranteed.

  13. I want to address a comment made above. Yes, The Student Loan People did say this program could stop at any time, but I asked questions about this 3 different times, from 3 different employees. What they said could stop at any time was the ability to borrow money under the Best in Class name. They could not guarentee money would be available to borrow, but they assured me that the money borrowed already would be "grandfathered in" so that we could work off what was borrowed. They said they would stop loaning money in this program at any time they felt they were running out of funds.

    Not only do they need to be held accountable for promoting loans that could be worked off, they need to be investigated for their interest methods. If it wasn't for the slight chance that the state or fed might come through on this promise, I would be refinancing my loans on my credit card, all 20 plus thousand dollars. I guarentee I could go to Chase or Bank of America or my NEA credit and pay these loans off in a fractin of the time. There is never a rhyme or reason for how the interest is calculated. I am suppose to have a %7.25 interest rate, yet look below at the last 3 payments. In April I tried to make a double payment to get a little ahead. It didn't help. All of one payment went to principal, but then almost 2/3 of the 2nd payment went to interest. That is astronomical. Every month I make my payment, and every month after interest, I still owe about the same amount of money. It will take 30 more years to get this paid off.

    Date Applied to:
    Type Amount Principal Interest Fees
    Payment $165.00 90.03 74.97 0.00

    Payment $165.00 63.24 101.76 0.00

    Payment $165.00 165.00 0.00 0.00


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