If you have student loans, it's likely you've received a call, flyer or seen a Facebook FB, +0.45% post from a company offering to help you manage your student loans.
"Winter is coming for debt relief scams that prey on hardworking Americans struggling to pay back their student loans", said Maureen K. Ohlhausen, FTC Acting Chairman. Attorney General Josh Stein today announced that his office is partnering with the Federal Trade Commission (FTC) to target student loan debt relief scams. It's illegal for companies to charge you in advance before helping you.
Further developments in this coordinated enforcement effort are expected.
NerdWallet reported that aside from enforcement actions by a handful of state attorneys general, little was being done.
In the cases the FTC investigated, companies claimed to be affiliated with the government or the consumer's loan servicer, and promised to reduce or eliminate student loan debt.
While the government has established some ways for student loan debt to be forgiven, borrowers should understand that it is very hard to walk away from a student loan.
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Like an endless game of whack-a-mole, the FTC, Consumer Financial Protection Bureau, and state attorneys general have struggled to keep up with student loan debt relief companies, which typically charge struggling borrowers upfront fees to access free government programs such as loan consolidation, income-driven repayment, and loan forgiveness. At that time, industry groups representing the student debt relief industry began popping up.
She says the students would have been much better off using the money they paid in upfront fees to make payments on their loan balances.
More than 60 percent of North Carolina's college graduates have student loan debt.
The latest lawsuits announced by the FTC as part of "Game of Loans" were filed against companies in California and Florida that allegedly collected more than $51 million in illegal upfront fees from borrowers nationwide. There's nothing a company can do for you that you cannot do yourself for free. For example, the agency charged that Los Angeles-based A1 DocPrep Inc. took at least $6 million from consumers through student loan and mortgage relief schemes. The U.S. District Court for the Southern District of Florida froze assets of Strategic Student Solutions, a company accused of taking more than $11 million from consumers by falsely promising to reduce student loan debt and to fix customers' credit.
Loan forgiveness in exchange for information. The company also told consumers not to communicate with their loan servicers, and fabricated income, unemployment status, and family size information on relief applications, the FTC alleged in its complaint.
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