Firms offering student loan “debt relief” are deceiving borrowers into paying hundreds or even thousands of dollars for access to free government programs, according to a recent consumer watchdog report.
With student loan debt soaring to record levels, many graduates are turning to companies that claim to help reduce or manage their debts. However, some of these firms are charging borrowers initial fees as high as $1,600 and monthly fees as high as $50 to secure services that these borrowers could otherwise get for free, according to the report from the National Consumer Law Center.
While the government offers several relief programs free of charge, such as repayment plans based on a borrower’s income level, getting through the red tape is “rarely easy,” according to the report. And many borrowers are unaware that the programs even exist in the first place.
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Other concerns identified by the report included widespread use of mandatory arbitration clauses, requiring borrowers to sign over power of attorney and soliciting borrowers federal loan PIN numbers, which provide access to loan account information, raising privacy concerns.
In many cases, it appears the firms are violating numerous federal and state consumer protection laws that are already on the books, according to the report. As a result, the consumer group called on federal and state regulators to “step up to investigate these companies.”
‘Debt relief’ firms misleading student loan borrowers | KMOV.com St. Louis
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