Ethan R. Okura
Hawai‘i Herald Columnist

Sometimes you can do everything right, but still have everything go horribly wrong. Sometimes you do nothing at all and still have everything go very wrong.

In the United States, you are innocent until proven guilty, except when it comes to fraudulent student loans that are taken out in your name. In that case, you are required to prove your innocence at your own expense or suffer the consequences. This is an area of the law that needs to be changed and improved, because in nearly all cases, you can’t even escape student loan debt by filing for bankruptcy.

This is the terrifying story of someone I have advised personally and whose struggle I have witnessed. Let’s call her “Jennifer,” which isn’t her real name. In April of 2015, someone used Jennifer’s name, Social Security number and birthdate and took out federal student loans at a well-known online university, which we will refer to as “University A.” Jennifer didn’t find out about this until a year and a half later, in September 2016. It was a fluke that she even found out, because the student loan servicer happened to send a statement to Jennifer’s grandmother’s house on a different island. Jennifer only lived with her grandmother for a short period of time between semesters when she was actually in college in 2001-2002.

• Lesson #1: Regularly Check Your Credit Report.

Fortunately, Jennifer’s relatives received the statement or she wouldn’t have known about the problem, possibly for several years. If you regularly check your credit report, you’ll have a better chance of noticing when an improper loan shows up against your Social Security number.

Jennifer immediately reported the identity theft to the local police. That was in September of 2016. She also requested that “University A” send her all of their school files associated with her name. Although “University A” concluded its investigation of Jennifer’s case in November of 2016, the school never provided the files of findings to her. She finally obtained a copy of the files in January 2018, when the U.S. Department of Education’s Ombudsman sent them to her.

In December of 2016, Jennifer also filed an online identity theft report with the Federal Trade Commission. That same month, she received a letter from the loan servicer stating that they were rejecting her claim, even though they had received the documents regarding her identity theft claim. They claimed that the school (presumably, “University A”) believed that Jennifer had actually taken out the student loans and used them (which was false).

• Lesson #2: File a Police Report and FTC Report Immediately. These are critical steps to take to protect yourself as soon as you find out. Unfortunately, as in Jennifer’s case, it does not always solve the problem.

In January 2017, Jennifer’s husband (let’s call him “Peter”) discovered that someone had also taken out student loans in his name at another well-known online university, which we will refer to as “University B.” Fortunately, it was detected rather quickly that he had been a victim of identity theft and he was not held responsible for repaying the fraudulent student loans that had been taken out in his name.

Meanwhile, Jennifer sent numerous letters and spent countless hours making phone calls to resolve her identity theft and fraudulent student loan problems at both “University A” and “University B.”

Finally, in May 2017, the fraud department at “University B” correctly determined that her claim was indeed a case of identity theft and returned the loan proceeds to the lender in full, relieving Jennifer of that student loan debt. In spite of that, she still had to contend with the tens of thousands of dollars that had been taken out in her name at “University A.”

Jennifer appealed the decision to hold her accountable for the student loans at “University A.” The U.S. Department of Education then sent her a denial letter, stating that in order for its decision to be overturned, Jennifer would have to obtain a judgment from a state or federal court, determining conclusively that she had been a victim of identity theft. The DOE letter stated that the school claimed Jennifer had taken out the student loans and that it had issued her a refund check for the loan when she cancelled her classes (obviously done by the identity thief). Thus, Jennifer was still responsible for the student loans at “University A,” even after she appealed the decision. This was false. A representative from the student aid department at “University A” finally acknowledged that it was indeed a case of identity theft. Unfortunately, they told Jennifer that they would not — and could not — return the funds to the lender as “University B” had done for both her and Peter because their financial books for the 2014-2015 school year had already been closed.

Jennifer was told that she had to investigate the fraud herself and find the perpetrator in order to clear her name. She learned that the address of the identity thief where “University A” had mailed the tuition refund check was in Georgia, so she called the police department there to file a police report. She also sent a detective to the address on file, which turned out to be an apartment that had been empty for months.

Last September, Jennifer finally hired a lawyer who specializes in these matters to help her to obtain the judgment required by the DOE.

• Lesson #3: Hire a Lawyer and Get a Judgment. The sooner you can start this process, the better for you.

In addition to the time and energy Jennifer has spent fighting this battle for the past two and a half years, the Internal Revenue Service recently seized her and her husband’s federal tax refund from April 2019 and applied it to the fraudulent student loan debt. She needed that federal tax refund money to pay for their Hawai‘i state estimated taxes. However, the federal government is proceeding as if she is guilty until she can prove that she is innocent.

• Lesson #4: Be Wary of the Government and the IRS. Even though the schools have now acknowledged that the loans were fraudulent, the DOE continues to require that Jennifer spend her own time and money to hire a lawyer and investigate the crime so that she can get her life back. And, the IRS is “stealing” her money until she proves she is innocent.

Jennifer’s case is still awaiting a final resolution, but we’re hopeful that with the help of her lawyer, she will obtain the necessary court judgment to close this matter for good.

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Ethan R. Okura received his doctor of jurisprudence degree from Columbia University in 2002. He specializes in estate planning to protect assets from nursing home costs, probate, estate taxes and creditors.

This column is for general information only. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate planning specialist.


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