Over 44 million Americans owe student loans. Those students and former students owe nearly $1.5 trillion to financial institutions that loaned them the money they needed to get an education. Many people graduate from college or complete graduate school owing six-figure debts that they expect to be paying off until they are almost old enough to retire.
Given this crushing debt load, it’s not surprising that a number of shady operators have attempted to take advantage of people who are burdened by student loans. The FTC recently cracked down on a few of them, but there are doubtless others who are still in business. Looking at the actions the FTC has brought may help educate people what to watch out for.
The companies targeted by the FTC claimed that they could get student debt payments reduced or even get loans forgiven. Indebted students and former students typically paid between $900 and $1,500 upfront for these promised services—and some paid as much as $4,500. Sometimes telemarketers working for these companies sent text messages and made phone calls to people in which they claimed to be employed by the Department of Education. Typically, they referred to a fictional “time-limited” program of student debt relief as a way of pressuring people to sign up immediately. One such call went as follows:
“This message is from the Department of Education. In regards to Donald Trump becoming President, all programs for student loan forgiveness will be stopped immediately as soon as he takes office in January. In order for you to qualify, you must apply within the next 24 hours or you will not be able to have your student loan payment reduced. Please contact us at [toll-free number].”
The companies also pretended either to be or to be affiliated with non-profit student organizations, including one called Project Uplift Students. The website for that fictional group stated:
“We believe many Americans are unable to pay thier (sic) student loans and still be able to afford to live their lives comfortably. That is the sole reason this organization was founded to put an end to your student loan nightmare and finally have you placed in a payment that is affordable to you.”
When some consumers attempted to cancel their contracts with these companies, they were told that their credit rating would go down if they canceled.
If you’ve been tempted by a company that offers student debt relief, there are a few things to remember so that you don’t become a victim of fraud:
• It’s illegal to charge people upfront for help with student debt relief
• Very few people get their student loans forgiven
• Most of the services that “student debt relief” companies offer are available for free from the US Department of Education. The official debt relief programs, however, are very limited and restrictive—so don’t get your hopes up.