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Beware student-loan assistance scams
YOUR LEGAL RIGHTS
Minnesota Attorney General
Student loan debt in the United States now tops $1 trillion and is the second largest form of consumer debt, second only to home mortgage debt.
With many recent graduates struggling to find jobs and the amount of student debt rising, the student loan assistance industry--and the opportunity for scams--has grown.
Student loan assistance companies sell services that claim to help borrowers manage and repay their student loans.
Student loan assistance scams try to hide the fact that they charge thousands of dollars for something borrowers can do for free, often claiming to have “inside information” or special relationships with the U.S. Department of Education to dupe borrowers into paying.
It is important for student loan borrowers to be on the lookout for scam artists who charge hefty fees for one-size-fits-all services that aren’t right for everyone and are often available for free from the government.
How it happens
“Tracy” signed up for what she thought was a student loan repayment plan sponsored by the U.S. Department of Education. After paying almost $500 in fees--money that she was told would count toward her loan payments--she found out that the repayment plan was not affiliated with the government and the fees were not applied to her loans.
“Jeff” contracted with a student debt relief firm to consolidate his loans. After several $40 monthly payments, Jeff discovered that none of the payments had been applied to his loans and that his loans were now in default.
Student loan assistance scammers may advertise consolidation and deferment and forbearance programs as one-size-fits-all, surefire fixes for borrowers struggling to manage their student loan debt.
It is important to remember that not all repayment plans work for everyone. Choosing the wrong repayment plan can have serious consequences.
For example, some deferment and forbearance plans are only appropriate for someone who is permanently disabled and unable to work. If a person who signed up for one of these plans gets a job and earns money down the road, the person may have to pay back thousands of dollars in back payments, fees, and interest.
To avoid student debt assistance scams, watch out for these red flags:
• High-pressure sales pitches
• Hefty upfront fees
• Blank contracts
• Deceptive logos
• Over-reaching or misused powers of attorney
• Phrases like “Call Now!” “Guaranteed Results!” or “Savings Plan Available for a Limited Time Only!”
• Requests for a student’s loan PIN for services (The U.S. Department of Education advises borrowers against sharing their four-digit National Student Loan Data System PIN with others.)
How to get help
If you need help managing or paying student loan debt, you should contact your loan servicer to learn about the repayment plan that is best for you and loans. You can also visit the U.S. Department of Education Federal Student Aid Office website, at studentaid.ed.gov, to learn more. All forms are free to download and submit.
The following agencies also provide information about repayment plans and how to avoid student loan assistance scams:
• Consumer Financial Protection Bureau
Department of the Treasury
1500 Pennsylvania Avenue Northwest
Washington, DC 20220
Toll free: 1-855-411-CFPB (2372)
• U.S. Department of Education
Federal Student Aid Ombudsman Group
830 1st Street Northeast, Mail Stop 5144
Washington, DC 20202-5144
Toll free: 1-877-557-2575
• Federal Trade Commission
Consumer Response Center
600 Pennsylvania Avenue Northwest
Washington, DC 20580
Toll free: 1-877-382-4357
If you have been contacted by a student loan assistance scammer, you may report the matter to the Minnesota Attorney General’s Office:
Office of Minnesota Attorney General
1400 Bremer Tower, 445 Minnesota Street
St. Paul, MN 55101
651-296-3353 or 800-657-3787
TTY: 651-297-7206 or 800-366-4812.