A U.S. Department of Education program that lures college students into teaching in "high-need" schools can turn into a virtual bait-and-switch scam that leaves young, public-spirited teachers mired in debt, a ConsumerAffairs investigation reveals.
"This is an advertised federal program to help people become teachers. In reality, it's a for-profit scam," said one teacher whose grant was converted to a loan because of a minor administrative error.
The "profit," it turns out, goes not to be a private lender but to a Pennsylvania state agency that distributes grants to students in the Keystone State, though whether the interest and penalty payments go the loan servicer or to the Department of Education isn't clear.
The so-called TEACH grants offer $4,000 to college students who agree to teach in designated elementary or secondary schools for at least four years. Applicants are told that if they do not meet the requirements -- if they stop teaching or take a job at another school -- the grant may be converted to an unsubsidized loan.
What the budding teachers are not told is that making the slightest error in filling out the blizzard of annual paperwork that accompanies the grant can -- and often does -- cause the grant to be converted to a loan that is turned over to aggressive private collectors, something that happens with alarming regularity. In one Idaho school, all seven teachers receiving TEACH grants had been victimized by the scheme.
The end consequences can be disastrous for the young teachers. They are, after all, teaching in troubled schools that they might not otherwise have chosen, possibly for less money than they might have been able to make in more affluent school districts. On top of that, they are suddenly burdened by a debt that they had never anticipated.
That's what happened to David West, who applied for a TEACH grant while he was a student at the University of South Carolina. He got the $4,000 and took a job teaching visual arts at White Knoll High School in Lexington, S.C., a subject and school that met the TEACH criteria. He is currently in his fourth year of teaching there.
Things were fine the first two years, but at the beginning of his third year, West was tripped up by paperwork.
"I had the form filled out completely with all relevant information, also signed by my school's principal certifying everything. I submitted the form on time to them, but I overlooked a spot on the back of their dense form that required my signature," West told ConsumerAffairs.
"They sent me a letter saying I had 30 days to complete and resubmit the form, but I didn't receive this letter until about two weeks into that 30-day period. I sent the form to my principal's secretary," he said. "When I resubmitted the form via fax, it was at most two days past their deadline. I never imagined that such a seemingly innocuous administrative oversight would end up costing me $4,000 plus interest."
West was quickly informed that his grant had been converted to a loan -- a delinquent loan at that -- and he began receiving demands for payment from FedLoan Servicing, a contractor that does the Education Department's dirty work.
West appealed FedLoan's decision, but on Oct. 5, he was informed in a harshly worded email that the appeal had been denied and that collection efforts would begin:
Your account is delinquent from July 2, 2015 for $237.50. You will receive calls, letters, and e-mails regarding the delinquency until it is resolved. In addition, we report monthly to each nationwide consumer reporting agency, and the following actions may be taken if your loan(s) default:
1. Your default will be reported to each nationwide consumer reporting agency.
2. Your account balance will be due in full.
3. Collection fees of up to 25% may be added to the principal balance of your loan(s).
4. Your income tax return [sic] may be seized.
5. Any federal assistance or wages you receive may be garnished up to 15%.
6. You will no longer be eligible to receive federal financial aid.
7. You will no longer be eligible for repayment options.
West feels misused. He notes that he met and continues to meet all the qualifications for the grant -- he completed his studies and received his degree in an approved field, accepted a position at an approved "high-needs" school, and has been teaching there continually for more than two years.
The only thing he failed to do was successfully wade through and complete the complex forms that are the trademark of the federal bureaucracy.
Critics say it's the equivalent of the "zero tolerance" policies used in some school districts. Students are harshly punished for minor errors while school board members, administrations and teachers get a free pass for much more significant errors and oversights. In this case, it's teachers who are being penalized -- even robbed -- because of a minor error totally unrelated to their work.
Congressmen don't care
After getting nowhere with FedLoan, West did what any taxpayer would do in a similar situation. He turned to his Congressional representatives.
Sen. Lindsey Graham's office was no help. "The response I received basically parroted the rationale FedLoan Servicing is providing for converting this grant into a loan. It seems they called on my behalf and just relayed to me what FedLoan Servicing told them."
West then sought help from Rep. Joe Wilson, who represents the area where White Knoll High School is located. "I work in his district, but I don't live in his district. I received a letter from him stating that he wouldn't help since I don't live in his district."
He has not yet contacted Rep. Jim Clyburn. "I'm simply at a point where even thinking about this makes me upset," he said. Clyburn's office did not respond to two emails from ConsumerAffairs.
He's not alone. Many others have had similar experiences. In Idaho, Jennifer Zamora wrote about her experience with TEACH and FedLoan in a statewide publication for educators.
"As a single-mother, raising two daughters on a teacher’s salary of $30,500, I have an extremely limited budget. I was outraged when I contacted FedLoan Servicing on April 25, 2014, to simply update my address, and I was informed that my 'grant' was converted to a loan due to a mistake on the December paperwork," she wrote. "Even though I have documents to prove these transactions, I continue to be denied in my dispute because the 'grant' has already been converted."
All grants converted to debt
Zamora soon discovered hers was not an isolated case.
"In my rural elementary school of 32 certified teachers, seven teachers have received the TEACH Grant; all seven so-called 'grants’ have been converted. Just imagine the money being made from the interest on these grants nationwide!" she said.
Zamora, who had received two $4,000 grants, said she had been in danger of losing her home but -- unlike West -- her Congressional representative came to her aid.
Similar cases can be found here and there on the Web, including this from Stacey of Wilmington, Delaware, in a ConsumerAffairs review:
"I met and still meet all the requirements of this program. I still teach in a high need school and I have taught in a high need school and low income school for 10 years. I received $2,000 from this program. Because I checked the wrong box in the paperwork you have to send in each year verifying your employment, they converted my grant to a loan."
Like David West and Jennifer Zamora, Stacey is still doing all the things the grant program requires: she is still teaching in a qualifying subject in a qualifying low-income school. Her only slip-up was a minor paperwork error, something that is nearly impossible to avoid in many dense federal government documents.
The thanks she has received for her work?
"I did not know and did not send back a corrected form in time. I wrote a letter of appeal once it was converted and they denied it. Since then, they have sent it to several collection agencies and I just found out that I will not get my 2014 federal refund because they are taking it to pay the grant."
Then there's Anthony of Staten Island, NY:
"Took a job commuting two hours each way to teach at a Title 1 school serving the emotionally disturbed, only to fulfill my TEACH Grant. Well, after the 3 years of dealing with a stressful environment, commuting way further than I needed, and compromising other job offers, I was scammed out of my TEACH Grant," he said in a ConsumerAffairs posting.
"They claimed they never received my intent, and that they tried to contact me via postal mail. I didn't receive one letter, and my intent form was sent way prior to the deadline. I was unaware there was any issue with my TEACH Grant and on 2/4/15 they converted my grant into a $10,000 loan with interest."
Time for a change
Zamora, the Idaho teacher, says it's time for a change.
"The U.S. Department of Education’s FedLoan Servicing needs to be held accountable for the mistreatment of the TEACH Grant program and the injustice to our nation’s educators. Teaching is one of the most complicated professions today. It requires knowledge, enthusiasm, classroom management skills, and a desire to make a difference. The grants offered by the federal government should not be a roadblock to achieving these goals, but incentives to enter the profession."
One problem with this is that all of the agencies involved are governmental -- the federal Department of Education and FedLoan, a quasi-public agency, operated by the Pennsylvania Higher Education Assistance Agency (PHEAA), created by the state legislature in 1963.
PHEAA's "earnings are used to support its public service mission and to pay its operating costs, including administration of the Pennsylvania State Grant and other state-funded student aid programs," according to the PHEAA website.
Does this mean money skinned from the likes of David West in South Carolina is being used to fund grants to students in Pennsylvania? Cheated teachers might be excused for saying it looks that way.
A PHEAA spokesman, Keith New, said he could not comment on the teachers' complaints. "We are just a contractor to the Department of Education. We have been instructed that all media inquiries must go to them," New said.
The Department of Education did not respond to a request for comment on this story.
Beyond the reach of the law
Since all of the agencies involved are federal and state governmental units, there may be no law enforcement agency with authority to intervene. The Federal Trade Commission, Consumer Financial Protection Bureau and other consumer protection agencies do not generally have jurisdiction over government agencies, only private corporations and individiuals.
"That's really a puzzler. I don't know what to tell you," said an official of one consumer protection agency who asked not to be identified. "It sounds like it would require action by Congress."
If Congress moves with its usual alacrity, Dave West and the other young teachers struggling with their unexpected debts could be retired before anything happens.