Paying off student loans is a big job, especially since it usually takes most people years to achieve it.
Consumers need to beware of debt relief companies that promise quick loan forgiveness. Scammers claim they’ll help you, for a fee, but their schemes often leave you deeper in debt.
The Federal Trade Commission has stopped two student loan debt relief schemes that it said bilked students out of about $12 million by using deceptive claims about repayment programs and loan forgiveness that didn’t exist.
“As Americans struggle with massive student loan debt and uncertainty around the prospect of forgiveness, scammers are looking to cash in,” said Samuel Levine, director of FTC’s Bureau of Consumer Protection.
Since 2019, the debt relief services operators of BCO Consulting Services, SLA Consulting Services, and SL Finance have lured consumers looking to pay down their student loans, according to FTC lawsuits.
The FTC said these debt relief scammers impersonated the Department of Education – and one used fake Covid-19 relief programs – to steal from consumers. They used the federal student loan pause to get people to sign up for bogus debt relief repayment plans.
Borrowers paid more money to the defendants than they would’ve paid to their actual loan servicers – especially during the pause when payments weren’t required, according to the FTC.
The defendants lied to borrowers, saying they’d take over servicing their loans but they didn’t, charged illegal upfront fees, and promised the fees would be applied to reduce the loan balance – but that didn’t happened, the FTC said. When borrowers realized they’d been tricked, the FTC said the defendants ignored refund requests or threatened actions such loan default when borrowers asked for their money back.
So watch out when a student loan debt relief company promises to help you. It’s a big red flag when they say you’ll need to pay for their service.
