Many companies in the business of helping students and parents through the student loan process are legitimate. They work hard to find the best options for their clients in securing and then repaying their federal student loans. These companies will work in the best interest of their clients, who in many cases are stuck with their lender not offering legitimate help. In many cases, these companies are able to assist borrowers getting into various programs where their lenders had previously denied them based on illegitimate reasons. Despite the best efforts of regulatory commissions and other agencies though, there are disreputable companies and out-right scam artists operating in the student loan consolidation industry.
The First Lawsuit Is Filed
In July, the Illinois State Attorney General filed suit against two organization called First American Tax Defense of Chicago and Broadsword Student Advantage of Frisco, Texas. Lisa Madigan is the first State Attorney General to file such. Madigan accused the companies of charging consumers hundreds of dollars in upfront fees in order to reduce or eliminate their student loan debt, but the service was never provided.
This is not a new practice, but with outstanding student debt at over $1.2 Trillion; the companies preying on people in financial distress are certainly increasing. In order to spot these scammers and avoid their traps, there are some signs to be aware of:
Watch Out For These Signs When Hiring A Student Loan Consolidation Company
- The company promises they have a way to get your loans cleared through bankruptcy. This is nearly impossible. As we’ve reported previously, federal and student loans are unlike all other forms of debt and cannot be processed through bankruptcy court. A process must be started called Adversary Proceeding. It is can only be filed in conjunction with an existing bankruptcy, but is decided completely outside of it. This requires a lawyer and extensive time in front of a judge; usually a completely different judge and courtroom. The last successful Adversary Proceeding we know of took ten years to finish. If you can afford a decade in court costs, then you probably don’t have to worry about defaulting on student loans.
- Claiming to get a lower repayment amount than anyone else can for you. All the repayment options are available to you through the federal government, and each company can only assist within the guidelines of those repayment plans. Your payment will be dependent on your income and family size, which will not change depending on who is assisting you with your federal student loans. If they state they can get you a better payment than anyone else, they are lying and should be avoided.
- Assured for immediate Student Loan Forgiveness. No one can guarantee this and there are no loan forgiveness programs that allow you to just stop making payments. All of them are tied into a repayment program, most of which require at least 120 qualified monthly payments before forgiveness or Student Loan Discharge can even be considered. You might qualify for a $0.00 payment, but that doesn’t mean the loan has been forgiven.
- Watch out for monthly “maintenance” fees. Many companies try to get you to commit to their maintenance payments so they can bill you for the foreseeable future. Most reputable companies will only charge one fee for the service of the consolidation or other loan forgiveness program.
- Make sure their work is guaranteed. If they did not properly qualify you for the program, and you are not able to get any relief, is the service fee refunded in full? Make sure this is in writing!
- Do you have a right to cancel? Make sure that there is a cooling off period from when you sign their service contract. Student Debt Relief gives all our clients a 10 day window to cancel the service agreement without any questions. This should be standard!
- Similar logos, websites and company names. Unreliable companies will copy logos and websites as closely as possible in order to convince people that they are the loan holder without actually breaking the law and stating so. Know your loan holder institution, the person managing your loan and the status of your loan account. The best resource for this information is the National Student Loan Data Source or NSLDS. Anyone with a student loan can get the most up-to-date information on their loan, including if that loan has been bought out by another institution. Everything that you need to know about the NSLDS is available here.
- Does the company disclose to you they are a private company not affiliated with the Department of Education, and that you can consolidate your loans on your own without the assistance of anyone?
Don’t Wait For Default, Act Now
Everyone should try and avoid getting tangled up in debt, but if you do, then the best way out is to get smart and try to get out from under it as quickly as you can. A tight job market or getting laid off with extended periods of unemployment may not always make that possible. If you do find yourself in a position where making a student loan payment is beginning to compete with paying rent or getting your car fixed, then you need to act now. Call one of our professionals at 866-921-8053 if you feel like you need help navigating and reducing your federal student loans.
Note: We are no longer providing any information on companies that assist with student loan consolidation & forgiveness programs. If you are unsure about the company you are working with, we highly suggest you get a second opinion and a third. The programs are all federal, and the information provided to you on the phone by each company should be the same as one another. Contact us at (561)424-6053 for a fair, and honest evaluation.
Compare the Best Student Loan Refinance Rates
Here are our top student loan refinance picks for 2019
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Student Debt Relief Loan Refinancing Advertiser Disclosure
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
SoFi: Fixed rates from 3.890% APR to 8.074% APR (with AutoPay). Variable rates from 2.550% APR to 7.115% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.550% APR assumes current 1 month LIBOR rate of 2.50% plus 0.04% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.