Consumers Need to be Wary of Student Loan Debt Relief Scams

Consumers Need to be Wary of Student Loan Debt Relief Scams”

You don't have to pay for help with your student loans. In each of these cases, the FTC alleges that the entities charged consumers illegal upfront fees, falsely promised to help reduce or forgive student loan debt burdens, and pretended to be affiliated with the government or loan servicers, in violation of the FTC's Telemarketing Sales Rule and the FTC Act.

Earlier this month, the Federal Trade Commission along with 11 states and the District of Columbia, announced a sweeping crackdown of these so-called student debt relief scams. And though the government offers a variety of forgiveness and debt-management programs, the requirements can be confusing for borrowers, opening up an opportunity for private companies to step in and charge for help. Prosecutors are targeting a growing number of companies that prey on desperate debtors among the 42 million Americans who've borrowed a total of more than $1.4 trillion. Illinois Attorney General Lisa Madigan also filed two separate actions against firms in her state.

While the government has established some ways for student loan debt to be forgiven, borrowers should understand that it is very hard to walk away from a student loan.

"Student loan debt relief scams are successful because borrowers are not receiving the information they need to repay their loans", Madigan said in a news release.

This initiative is the first coordinated federal-state law enforcement program to go after student loan scammers.

Falsely representation of a government affiliation: Debt relief companies often try to create the impression that they are affiliated with or endorsed by the federal government. "They rob borrowers of the money they could be using to pay down their student loan debt". The programs that they are promising access to can be directly accessed, for free.

More than 60 percent of North Carolina's college graduates have student loan debt. If a company is offering to help you manage your debt for an upfront fee, "that's a major red flag", she said. For example, the agency charged that Los Angeles-based A1 DocPrep Inc. took at least $6 million from consumers through student loan and mortgage relief schemes. Student loans are the second largest segment of US debt, after mortgages. Student loan debt relief scams often charge consumers hundreds or thousands of dollars in upfront fees. Also named in the complaint was Stream Lined Marketing, which does business as Project Uplift Students and Project Uplift America. As a result, Student Loan Group was required to refund $377,048 to borrowers. These scammers allegedly have used "deception and false promises of relief" to take more than $95 million in illegal upfront fees from US consumers over several years, says the FTC.

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