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Loan Defaulter Sues MIT, Citing Overlap

By Jackson Jung

An alleged loan defaulter has filed suit claiming that MIT and several of its employees broke the law in processing his loan repayment. David A. Hoicka '77 is charging the Institute on 16 counts, including violations of antitrust, racketeering, and fair dealing laws, and intentional infliction of distress.

Hoicka filed the charges after MIT sued to force him to repay his loans. He is also counter-suing MIT on behalf of present and former MIT students who have applied for financial aid. Hoicka, an attorney, is representing himself in the case.

Hoicka cites a September ruling by a federal court judge that MIT and 22 other universities, called the Overlap Group, colluded to set financial aid awards. The court concluded that as a result of the Overlap Group's meetings, students received less financial aid than they would have otherwise. MIT is currently appealing the Overlap decision.

Meanwhile, Hoicka has filed a class-action suit in which he claims to represent an estimated 80,000 "present and past MIT students... who obtained or were denied financial aid administered in any way by MIT while the Overlap Group was in existence."

Damages from the class-action could total an estimated $1 million to $100 million, Hoicka said.

MIT has filed a motion to dismiss Hoicka's countercharges, claiming that "all or substantially all of Hoicka's ... counterclaims are wholly insubstantial, frivolous and not advanced in good faith."

MIT attorney Jeffrey Swope said Hoicka's claims "don't fit under existing laws." Swope is an attorney at Palmer and Dodge, which is also representing MIT in the appeal of the antitrust ruling.

Hoicka's claim may be invalidated by the statute of limitations for private actions. This statute allows individuals to recover damages caused by an unlawful activity only if it occurred less than four years before the government filed suit to stop the activity.

The Justice Department did not file suit against the Overlap Group until 1991, while Hoicka's financial aid packages were negotiated before 1982. However, Hoicka charges that MIT "fraudulently concealed" its collusive activity, which may provide more time under the same statute.

A hearing on Hoicka's countercharges is expected in late February or March.

MIT's original complaint, filed on April 14, 1992, alleges that Hoicka defaulted on a 1986 promissory note issued as a refinancing of former student loans. The complaint seeks approximately $26,700 in loan repayment and interest charges, and about $8,800 in collection costs and attorney fees.

In the court file, Hoicka denies the allegation and claims MIT has "misstated and misrepresented the agreement, which is not in default." Furthermore, Hoicka alleges that while he was "ready and willing to comply" with all covenants in the contract, MIT "obstructed and prevented" him from doing so.

"I never had a reason to pick a fight with MIT until they picked a fight with me," Hoicka said. Hoicka said that he tried to set up a payment plan with MIT upon graduating from law school in 1989, but MIT refused. He also said approximately 20 payments of between $150 and $200 each were made to MIT while he was trying to establish a payment plan.

Hoicka added, "The powers that be at MIT [should] come to their senses and [realize] that in many of these cases, it's better to be reasonable and make a settlement. The Justice Department gave MIT a very nice offer ... but MIT said, `No way, we want to fight.' "

Few MIT students default on their loans in comparison with students from other schools. MIT's loan default rate in 1992 was 0.5 percent on Perkins Loans and 2.9 percent on Stafford Loans, according to Bursar Shirley M. Picardi. The national averages in 1990 were 6.2 percent for Perkins Loans and 15.5 percent for Stafford Loans.

Picardi added that an individual MIT loan default averages about $3,500, and that the highest single default has been about $35,000 to $40,000. MIT takes only about three loan default cases to court each year, and only as "an absolute last resort," she said.

"Virtually no MIT alumnus defaults on his loans on purpose. They just don't seem to set out to do this," Picardi continued. "Sometimes they are overwhelmed by adverse circumstances. Sometimes they mismanage their affairs. Sometimes they ignore the problem hoping it will disappear. And sometimes they are embarrassed and won't be forthcoming about their situations."

"We hope that by doing loan counseling early when students first take out their loans, they will get to know their student loan representatives and will feel comfortable calling them if any problems arise after they graduate from MIT," she said.