Beware of student debt scams
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According to the Consumer Financial Protection Bureau (CFPB), approximately 40 million people have student loan debt totaling $1.2 trillion dollars. Many are struggling to pay this debt back. Consequently, scammers are taking advantage of the situation. Many of these borrowers, out of desperation, will pay up to $1500 for services that are provided free by government agencies.
Unfortunately, this is not a new problem. For many years companies have been charging students and borrower for services that are free. These companies pop up at every level of the student loan process. From assisting with applying for loans to dealing with debt, even filling out the Free Application for Federal Student Aid (FAFSA) form. FAFSA has been particularly challenging since there is a FAFSA.gov site that is free and then there are similar sites, which are paid services.
The Department of Education’s role is to assist potential borrowers on student loans as well as provide guidance on paying back the loans. They are not designed to provide consumer protection. The two federal agencies that are the most responsible for helping student loan borrowers and oversees deceitful lenders are CFPB and the Federal Trade Commission (FTC).
Borrowers are encouraged to utilize the tools and services that CFPB and FTC have on their sites. All the tools are there to assist in making the best decisions needed for all levels of the student loan process. No one needs to pay a fee. Too often borrowers are paying unnecessary, high fees when dealing with student loans.
The FTC recently announced a new program called Operation Games of Loans. This is a joint effort between the FTC and state law enforcement to fight against student loan debt scammers. Often the scammers claim affiliation with the government or the consumer’s student loan server and they often promise to reduce or eliminate student loan debt. In fact, they typically do nothing, often leaving the consumer worse off.
Here are some tips to avoid scams:
- Never pay up a front fee.
- Only scammers promise fast loan forgiveness.
- A department of Education seal does not me it is legit.
- Do not share your FSA ID with anyone
The CFPB, FTC, as well as the Michigan State Attorney General office, can assist borrowers if they believe they have been a victim of a student debt fraud. At the CFPB site, there is a link specific to student loan complaints. The CFPB also has an ombudsman’s to assist with questions on student loan issues.
Assistance with student loans is available free. You do not have to pay for help with your student loans. There is nothing a company can do for you that you cannot do yourself for free. A great place to start is StudentAid.gov/repay. For private student loans, begin by talking with your loan servicer.
MSU Extension offers financial management and home ownership education classes. For more information of classes in your area, go to either http://msue.anr.msu.edu/events or www.mimoneyhealth.org.
