Sales class graduates deceived, resulting in over $30 million in student debt forgiveness

A significant amount of money in debt relief is set to be distributed to graduates of a 12-week sales bootcamp that has been accused by the federal government of enticing students into accepting illegal and predatory loans by promising them six-figure salaries and guaranteed jobs.

A court order signed by a Delaware bankruptcy judge on Monday mandates Prehired, a self-described workforce accelerator, to permanently shut down and provide over $30 million in debt forgiveness to hundreds of former customers. The Consumer Financial Protection Bureau alleges that these customers were not provided with key loan details and were deceived through deceptive debt collection practices.

The court order was announced on Monday by the federal agency and 11 state attorneys general, who collectively sued Prehired and its affiliated companies in July for their business practices.

“Prehired lured student borrowers into debt with false promises of job placements and claims that students wouldn’t have to pay until they got a job,” stated CFPB Director Rohit Chopra. “Today’s action with our state partners ensures that borrowers harmed by Prehired can receive redress and have their illegal loans canceled.”

This litigation adds to the negative reputation of income-share agreements, which were once considered a potential solution to the country’s student loan crisis but have since faced criticism and legal challenges.

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How do income-share agreements work?

The concept was relatively simple: Colleges or training programs would provide upfront payments to students to attend school. In return, the students would share a small portion of their future earnings with the lenders. However, the practice was quickly tarnished by predatory tactics and has faced numerous lawsuits, primarily on consumer protection grounds.

According to the CFPB, Prehired charged up to $30,000 for their three-month bootcamp program. If students couldn’t afford the cost, the company encouraged them to enter into income-share loans while falsely promising that repayment would only start once their yearly earnings reached at least $60,000.

Between January 2018 and April 2022, hundreds of students enrolled in Prehired’s program, with over 1,000 participating in income-share agreements.

The CFPB alleges that Prehired transferred these loans to affiliated companies and attempted to collect debt in locations where the consumers didn’t reside or were physically present.

Prehired engaged in “demanding and collecting payments, pursuing debt collection actions in undisclosed forums, and misleading consumers into signing settlement agreements with minimal benefits,” according to court documents.

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Judge John Dorsey approved the stipulated judgment, which requires Prehired to reimburse over $4 million to student borrowers who made payments on income-share loans between May 2019 and March 2023.

All outstanding loans, amounting to nearly $27 million, were also cancelled.

The company’s bankruptcy trustee and their attorney have not yet responded to requests for comment.