For grads feeling the squeeze of student loan payments, a “debt relief” plan may seem like a dream come true. But be warned — firms peddling these programs are tricking borrowers into paying for what the government provides for free.
Starter fees for the “debt relief” or “debt management” plans offered by these companies can reach up to $1,600 with $50 in monthly maintenance fees, mostly for loan consolidation, according to research from the National Consumer Law Center.
Undercover workers for the Center found that these companies often neglect to tell clients about the government’s no-cost alternatives, or conceal the information, CNN Money reports. Adding to the firms’ suspicious behavior, some of their websites offer false information, and one firm even lied directly to a caller about being accredited by the U.S. Department of Education.
Federal Programs Need A Higher Profile
Lack of awareness and ease of accessibility to government relief is increasing the likelihood of borrowers getting conned, according to the report. Few realize that applications for government programs like loan consolidation and income-based repayment are available free online.
“One of the best ways to keep these companies in check is for the government to improve its administration of its own programs,” Deanne Loonin, an attorney for the National Consumer Law Center, told CNN Money.
But some of these companies may face investigation for infringement of consumer protection laws. Firms have in some cases asked consumers to hand over private loan account information or even their power of attorney.
If someone comes knocking offering to disappear your debt, make sure you know the facts. You can also access a range of free information and tools about student loans at the Department of Education’s website for borrowers.
RELATED: Understanding Student Loans 101