Debt Relief Firms Preying on Student Loan Borrowers

A new study says some companies charge up to $1,600 up front and $50 a month, although the services they provide are unclear or can be done yourself for free.

Read These Next

Better Investing

A consumer watchdog group says federal and state governments need to crack down on companies offering sketchy student loan “relief.”

In a new report, the National Consumer Law Center says that “given the many misrepresentations uncovered, it is unlikely that these companies are providing quality services in return for the money they are charging.”

The group made 10 “secret shopper” calls to 10 different companies, analyzed the websites of those and other companies, reviewed contracts and consumer complaints, and talked to regulators. Here’s what it found:

  • Many characterize government programs as their own.
  • Initial fees were up to $1,600 and monthly fees were $20 to $50, even though it wasn’t clear what ongoing service would be provided.
  • None of the companies that were called listed their fees online, and most would not initially give an exact cost by phone.
  • Many claimed to offer a broad range of services, but when pressed for details admitted offering only loan consolidation.
  • Many featured inaccurate information about loan topics or plagiarized it from other sources (including the NCLC).
  • Mandatory arbitration clauses, limiting consumer ability to sue, were common in contracts.
  • Some companies said they needed the caller’s federal student loan PIN to provide assistance, raising privacy issues.

The report suggests that many of the companies are violating consumer protection laws. But even when companies aren’t breaking the law, there isn’t much they can do that you can’t do yourself — for free.

Here’s the Education Department’s information on loan consolidation, the primary service these companies offer. Here’s its page on loan deferment, forbearance and forgiveness programs. We have more advice on dealing with loans, and cutting the expense of college in the first place, in the links below.

Sign up for our free newsletter

Like this article? Sign up for our newsletter and we'll send you a regular digest of our newest stories, full of money saving tips and advice, free! We'll also email you a PDF of Stacy Johnson's "205 Ways to Save Money" as soon as you've subscribed. It's full of great tips that'll help you save a ton of extra cash. It doesn't cost a dime, so why wait? Click here to sign up now.

Read These Next

Comments

  • justastaffmember

    Honestly, though, they are not doing anything that any other business does not do. They are capitalizing on the fact that people don’t know how to, or would rather not go through the steps of investigating their options and filling out the forms. Yes, it is free to do ALL of what these companies do for borrowers, but people also COULD make their own clothes, cook their own food, apply for scholarships, cut their own hair, incorporate their own businesses, etc., etc., etc. It is business. Unscrupulous, maybe, but business nonetheless.

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,532 more deals!