Get Out of Debt Guy

Attorney General Targets Student Loan Assistance Companies

Posted January 22, 2014

I'm not quite sure how to best get the word out to protect consumers from student loan assistance scams. It's a topic I've been talking about for some time now and it's going to be a huge scam pit for many people. Some people have already been scammed by companies charging tens of thousands of dollars for student loan assistance help they could have received for free.

I understand why people fall for these schemes. They see a television commercial or hear a radio ad that promises easy or non-profit help to deal with student loans and that triggers a call. But what the student loan assistance companies are not doing is telling people the help for their federal loans is available for absolutely free from the Department of Education.

I've seen fees as high as $20,000 and $49 a month for twenty years being charged to consumers for consolidation, forgiveness, or payment reduction programs. A nominal fee for providing the information seems reasonable if people are aware they can get the help for free but want to pay for it anyway. But that's not what is happening.

Debtors are being often led to believe the student loan assistance company has some "secret sauce" or special relationship with the Department of Education and not being told the help is really available for free. Rather than helping consumers out, many companies are putting the person deeper in debt with new expensive fees and charges on top of their student loans.

Instead, people are being sold some student loan magic by salespeople and telemarketers who are charging advance fees for these services. And these fees may even be illegal under the Telemarketing Sales Rules by the Federal Trade Commission.

Advertising, promises, contracts and results have all raised concerns about truthful disclosures and alleged deception of student loan assistance marketers.

Instead of paying large sums for student loan help people can get free help by reading The Ultimate Guide to Dealing With Student Loans You Can't Afford.

Today the New York Attorney General has taken a first step in investing some of the student loan assistance companies. The New York newly established Student Protection Unit took its first official action by issuing subpoenas to 13 student debt relief companies as part of an investigation into concerns about potentially misleading advertising, improper fees, and other consumer protection problems in that industry. It would be great to see North Carolina lead this charge as well.

In particular, the New York Department of Financial Services' (DFS) Student Protection Unit is probing concerns that this industry is charging high, improper fees without adequate notice for enrolling students in debt relief programs that are available for free through the federal government.

Some companies also offer debt relief services in connection with private student loans. These private debt relief companies may charge inappropriate fees and may misrepresent their ability to obtain the results that they represent they can achieve.

Remember, when it comes to buying help for debt issues you need to verify the claims made and be a smart shopper. There are just way too many scams operating out there trying to sell you overpriced help.

Steve Rhode
WRAL Get Out of Debt Guy

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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.