Students Get More Than $200,000 Refunded After Financial Aid Delays

Students at one school are getting more than $200,000 refunded after experiencing financial aid delays.

President Joe Biden has passed several student loan forgiveness options for federal borrowers, but students at La' James Cosmetology School are getting something even better.

Read more: Student Loan Forgiveness Updates and FAQs

The for-profit Iowa school agreed to the refunds after delaying or even withholding financial aid to hundreds of students.

Students previously filed a lawsuit in 2020 against La James' International College, alleging that the college failed to make timely disbursements for federal student loans that would have covered their tuition and room and board.

Because of the delays, many students were unable to pay rent and saw their credit scores suffer. Some even left school altogether because of the financial obstacles.

"Schools have to make sure loans are issued in time to cover expenses like tuition, housing, and other supplies that are essential for students in pursuing their degree," Alex Beene, financial literacy instructor at the University of Tennessee at Martin, told Newsweek. "In this situation, the school failed to distribute those loans in the time needed, and the result was frustrated students that encountered a financial roadblock."

Last year, La' James met an agreement and the deal was submitted for approval in January of this year. Now, after a judge approved the payments, the checks will start going out to roughly 150 former students affected by the delays.

The agreement outlined that the students would get $1,500 back from the school, amounting to a total of $220,000. Specifically, those who had federal loan disbursements delayed or rejected after March 2018 are eligible for the checks.

Read more: Federal PLUS Student Loans 2024 Review

La' James is also covering the payments for the students' attorneys, which will cost roughly $560,000 and go to the Des Moines-based law firm Wandro, Kanne & Lalor.

Newsweek reached out to La' James for comment via email on Thursday.

The for-profit cosmetology school also faced fines over improper sanitation and not offering a sufficient number of qualified teachers in 2014.

Additionally, La' James faced a fraud lawsuit the same year, and the school eventually had to pay back $500,000 to the state and forgive $2.1 million in student debt.

Beene said La' James' fate is a lesson to other schools that when money and education are on the line, even small delays in distributing funds can have major repercussions.

"If you're a student receiving any type of financial aid, and you don't see it applied to your account, you want to try to reach out to your institution well in advance in the hopes of avoiding occurrences like the one that happened here," Beene said.

As for the students finally receiving $1,500 back, it might be a long time coming, but it's often worth the hassle when students are struggling to keep up with rent payments and attend class.

Read more: How to Consolidate Student Loans

"When we discuss the trillion dollar student loan problem in the United States, sometimes it is easy to forget that even a little bit of relief can make a big difference for borrowers," Michael Lux, an attorney and founder of the Student Loan Sherpa, told Newsweek. "It won't make them whole, but it is something."

Students who aren't yet in college should use the strife at La' James as a warning that they should always research a school before making any sort of enrollment deposit, experts say.

"Successful outcomes for shareholders and for students don't always align, and if you are going to borrow money to pay for school it is critical to make sure that you are getting a good investment," Lux said.