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.