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Published: September 2016
Desperate students need protection from debt “relief” scams
Advocates called on the White House to crackdown on private companies that charge fees for student debt assistance, loan discharge forgiveness and consolidation services that are otherwise free. Often, the scams are passing off the federal government’s income-based repayment programs as their own and billing borrowers for it. These companies, known for preying on desperate student borrowers, must be closely monitored and shut down to protect borrowers and prevent them from paying for unnecessary services, adding to their mounting financial problems.
There are hundreds of scams trying to make a dollar off students’ desperation and hope, according to a survey released last summer by coalition partner and advocacy group Student Debt Crisis and personal finance website NerdWallet. Most so-called debt relief companies operate the same way: they consolidate the borrower's loans and get them into an income-driven repayment plan. After that, the borrower sends their monthly payments to the company. That payment often includes a hidden monthly fee. And worse yet: Sometimes these scam debt relief companies don't pay the lender at all. However, what borrowers don’t usually know is that these repayment programs are already available to them, for free, through the U.S. Department of Education. The survey found that about one-third of respondents said that the student debt “relief” companies they paid did help, despite charging them for the service.
Consumer Action joined coalition partners in writing a letter to the White House urging the Administration to investigate these known scam artists and to take immediate action against those companies that are found guilty of misleading borrowers and violating federal law.
Student Debt Crisis
AFLCIO | AFT (American Federation of Teachers, AFLCIO) | Center for Responsible Lending | Consumer Action | Higher Ed, Not Debt | Maryland Consumer Rights Coalition | National Consumer Law Center | National Education Association | One Wisconsin Now | Roosevelt Institute | Student Debt Crisis | The Institute for College Access and Success | Veterans Education Success | Western New York Law Center | Young Invincibles
For more information, please visit Student Debt Crisis.
Desperate students need protection from debt “relief” scams (CoalitionLetter-DebtReliefCompanies_.compressed.pdf)