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Suing Former Loyola Students: When Debt Turns Into a Legal Battle

Jesuit ideals emphasize the spiritual over the material — but that doesn’t mean Loyola University Chicago students get a free pass when they don’t pay their tuition, room and board or other university fees.

As the price of Loyola and other private universities continues to rise, making it more difficult for some students to cover the cost, the university has had to take former students to court, suing for the money the school argues the former students owe, a Phoenix investigation found.

As of the spring term balances, Loyola is owed almost $21.4 million from past students, graph (1)according to John Campbell, Loyola’s bursar. This dollar amount goes back to 2006.
Campbell said that 45 student debt lawsuits are currently pending between Loyola and former students, who either graduated or dropped out early. In 2015, 15 were filed with Markoff Law LLC, which has acted as one of Loyola’s primary representatives in student debt lawsuits for more than 10 years. Two have been filed with the firm so far in 2016. However, before it gets to the point of filing a lawsuit, the school uses a collection agency to try to get money it believes it is owed.

In one case filed in June 2015, Loyola sued a former business student from Chicago for more than $8,300 plus court and collection costs, according to court records. The case went to trial, where an agreement was made between both parties that the student would commit to a monthly payment plan of $150, beginning on Dec.1, 2015 and ending when the agreed upon amount owed — $7,200 — is paid in full.

In another case filed in March 2015, Loyola sued a former chemistry student from Schaumburg, a northwest Chicago suburb, for more than $32,000. The judgement was made in favor of the university, and a citation was issued for her bank to appear in court in January 2016 for a payment plan to be arranged.

But as harsh as litigation, or taking legal action, may sound, Loyola officials emphasized that they head to court only as a last resort and do so less often than other schools. About 3 percent of student accounts at other private universities are sent to collection agencies and onward, according to Campbell.

At Loyola, approximately 1.5 percent of annual students’ accounts are sent to a collection agency, and about 2 percent of those students’ accounts end up in litigation, according to Campbell. Student accounts aren’t sent to a collection agency until at least one year after their last term at Loyola, he said. This debt may include unpaid bills for tuition, room and board, various unpaid fees or loans from the university — but it doesn’t include federal loans, which may be paid over the course of many years.

Jessie Ludwig, a senior biology major, said that she would have thought a larger percentage of students would end up in debt collection after college. For her, anticipated debt after graduation was a major factor in deciding where to go for college, but not the most important one.

“Previously, I was very worried about paying back Loyola,” said the 22-year-old. “But fortunately, I have secured a position at the Cleveland Clinic post-graduation and I plan to pay off any debt as quickly as possible.”

Of the lawsuits Loyola has been involved in, many involved claims less than $10,000, but some were as high as $30,000, according to the Cook County Circuit Clerk’s database.

However, students with outstanding dues don’t immediately end up in litigation. When money is owed to the university, Loyola first attempts to collect the money without bringing in outside parties by trying to arrange payment plans with the former student, Campbell said.

If the former student’s balance isn’t paid six months after their last term at Loyola, the account is sent to ECSI, a third party billing servicer. ECSI works with the former student to arrange a payment plan, he said.

If debt payment isn’t resolved through ECSI, the former student’s account is sent to a collection agency such as Williams & Fudge, a national student debt collection agency, according to Robert Markoff, a senior partner of Markoff Law LLC.

Ideally, the representatives from the collection agency are able to work out a new payment plan that works for the individual, according to Markoff. Generally, debt forgiveness isn’t an option.

But even with so many stages put in place to resolve student debt, not all cases are resolved. When that happens, the agency sends the accounts to Markoff, and the two parties — Loyola and the former student — can take it to court for a judge to hear. This process begins with sending a letter that must meet the requirements of the Fair Debt Collection Protection Act — the federal requirements that inform the student who owes money of their rights as a consumer and enforce limitations on the debt collector’s actions.

The point of the letter is three-fold, Markoff said. First, it informs the former student that the firm now represents Loyola and that it seeks to recover the balance to the university. It also allows the former student to contact the firm and discuss any dispute he or she may have, or to tell the firm to cease all contact. The firm can also presume it reached the intended party if it doesn’t get bounced back to the office, Markoff said.

After a letter is sent, the firm decides what the best next step would be.

“Litigation may be an appropriate next step,” he said. If it is, the firm delivers paperwork to the court to be served to the individual.

Those papers — the summons and complaint — tell the former student, now a defendant, that he or she has been sued and on what date to appear in court.

The goal of this initial court proceeding is to resolve the debt and find a payment plan that works best for the individual, Markoff said, adding that student debt cases usually cannot be settled for less than what is owed.

The former student is advised to bring an attorney, but most don’t. Markoff said this may be because students don’t realize the court date isn’t just a suggestion — it’s a legal proceeding. It may also be because the individual can’t afford one or thinks the cost of an attorney isn’t worth it, considering the money already owed.

If the individual doesn’t show up to court, Loyola’s attorney presents what is due to the judge, and if the documents satisfy the judge, he or she may make a judgement in favor of Loyola.

“That judgement is a finding by the court that the defendant owes Loyola ‘X’ dollars,” Markoff said.

However, even though the student has “forfeited” his or her appearance that day, Illinois law allows up to 30 days for the defendant to come to court at a later date.

If the student does show, but no agreement is reached between the two parties, a trial follows to determine what the individual owes to the university and what payment arrangements will be made. Both sides present their cases — Loyola gives the reasons why the former student owes money, and the former student says why he or she doesn’t owe money. The decision is then left up to the judge.

Ultimately, debt collection can be enforced through wage deduction — where no more than 15 percent is taken from a paycheck — or by freezing bank accounts, Markoff said. In the case of a frozen bank account, the defendant can require a certain amount of money remain untouched in his or her bank account, giving Loyola access to the rest.

Regardless of the action taken, the person’s financial situation is taken into consideration.

“We can’t impoverish people with our mechanisms,” Markoff said.

If the firm doesn’t know where the person lives or any of their banking information, another court date is assigned — known as a citation to discover assets.

Sometimes, Markoff said, people think they can escape debt collection by claiming bankruptcy, but that doesn’t close all student debt costs.

“Even though you file bankruptcy — and you’re able to get rid of all your debt or most of it — some student loans are not discharged unless the court finds unusual hardship that would prevent you from ever paying these loans in the future.”

Generally, the university wins the case against the individual, Markoff said.

“The university carefully picks and chooses the cases where suits will be filed,” he said. “They see no reason why they shouldn’t count the full amount of their debt [in those cases].”

Blaze Pullman, 21, and Bobby Rice, 20, were surprised to learn that Loyola sues students for outstanding dues, saying that it doesn’t seem to fit Jesuit ideals, but from a business standpoint, it makes sense.

“I guess when you’re not paying back loans from a bank, they can sue you, too,” said Pullman. “When you think about it like that, they do have the right to do that. I guess I just never would have thought my university would do it, too.”

Rice, a sophomore information systems major, said his college choice wasn’t about the price tag, but about being at the school of his choice. But now, he said he thinks about the money that is “mounting up” on LOCUS.

As a junior with one more year left at Loyola, Pullman is  more worried about post-graduate bills than she was as a first-year student.

“I had the opportunity to go to a school that was fully paid for, but I chose to come here,” she said.  “But now, I’m a marketing major. Going into marketing after graduation, I’m probably not going to get the best starting salary, and I know that my debt has been increasing just because I’ll have gone to a private Jesuit university for four years. It will suck having to think about how I’m going to pay back all my debt.”

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