Student loan debt has a serious impact on countless Americans’ finances, preventing some of them from buying homes and starting families. The burden of this debt leads some borrowers to seek loan consolidation and other debt relief options.
Borrowers should research these options carefully and not give in to the temptation to seek a quick fix that could turn out to be a scam.
BBB Scam Tracker received more than 740 reports of debt relief and credit repair scams in North America in 2018. These scams cost consumers a reported total of more than $385,000, with the median consumer losing $70. Most commonly, these reported scams involved payment by bank account debit. Up-front fees, including fees to enter a repayment plan, are a common thread of debt relief scams. Not only are they illegal: according to the U.S. Department of Education’s Federal Student Aid division, borrowers are never required to pay for assistance with their student loans.
Some scam companies ask consumers to sign over a power of attorney for financial decisions, use it to put the consumer’s loans into forbearance, and ask the consumer to make payments directly to them rather than to the loan servicer. In reality, the company keeps the payments for itself, and the forbearance eventually expires without any repayment progress being made.
Help with loan repayment is available directly through the Department of Education and loan servicers alike, and applying for these programs is free.
BBB advises borrowers in search of student loan relief to consider the following tips: do your research on the company and the options available to you, don’t pay up-front fees to debt repayment companies, and think twice before signing a power of attorney. Never give a company your bank account information or your Federal Student aid website login information. These actions allow a company to make potentially devastating financial decisions for you.
Don’t agree to a forbearance or deferment plan long-term without doing your homework. These should be considered only as temporary solutions. Don’t be taken in by promises of quick relief.
The loan relief and forgiveness options available through the Department of Education still require years of payments, and these loans cannot be discharged through bankruptcy.