‘Debt Relief’?! Beware This New Student Loan Scam

Alexa Pugh

Student loan debtFor 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

  • Blen Butterson

    Be on the watch for Scammers Meredith Kang, Mitch Kang, and Sam Montgomery, employees of a scam company called “StudentLoansEdu”

  • Debt Help

    The first things to do is to find an expect financial consultant.

  • Laura

    Ever heard of Royalty Student Loan Relief in Da

  • Phill

    center for student debt reform… are they real?

    • Astudent

      prob not

  • Chris Lopez

    any word on a company called Student Consolidation Relief???

  • Marlee Ostheimer

    They would not send me the documents to review before asking for personal info such as social security and bank account numbers!! They said it all had to be processed over the phone. bullshit. The sales rep I spoke with, “David,” kept referring the their BBB rating, but there is no way to even prove the person i was talking to was affiliated with American Financial Benefits. If they were legit, they’d be up front with their paperwork. End of story.

  • http://www.daytonism.com/ Dayton Waters

    Student Debt Relief Center called me today. Was willing to set up an FSA ID and log-in credentials for me, which was necessary before he could transfer my call to a case worker.

    I told him I already had an FSA ID. I quickly logged into my account to verify that my credentials were still good. I figured it might be reasonable to need my FSA ID to confirm that I had a qualifying loan BUT, this guy actually demanded my ID and PASSWORD.

    That was the showstopper, folks. Any site that requires you to obtain a unique log-in ID and password does so under the assumption that only YOU will be using those credentials. He gave me some crap about needing to verify the amount of my loan so he could transfer me to a counselor, blah blah blah.

    I told him that I was not giving my credentials to someone I don’t know, in someplace I don’t know, on a call with what sounds like a daycare center in the background and that if he says he requires my credentials to access my personal information, he is a scam artist and a pretty lousy one at that.

    Guess what happened? He hung up.

    There is no service that requires you to give up your unique log-in credentials for anything. If you are asked, it’s an illegal operation. When you surrender those credentials, they person on the phone becomes YOU in the eyes of the system they are accessing and they have ALL the rights that you would have within that system. Are you going to trust someone you do not know to pretend they are you in ANY system that contains your personal and financial information? The answer is NO.

    Remember: the moment they ask for unique log-in credentials (YOUR username and password), run away. That’s the telltale sign the operation is a scam.