Student loan debt is an issue for many Americans, and for a great number of them, the situation has become a desperate one. This fact could be why so many borrowers are falling prey to student loan debt relief scams.
It is estimated that the national total student loan debt is well over $1.5 trillion. The average student loan borrower in 2018 is carrying just shy of $30,000 in loan debt, according to Student Loan Hero. This figure only represents what the average undergraduate student owes. For a graduate or professional degree, the borrower may end up with student loan debt well into six figures. With this much debt, borrowers can be paying on their loans for decades, which is why many of them jump at the opportunity, when presented, to get some sort of relief on their debt. The problem is these “relief opportunities” end up being more trouble than they are worth.
These companies offer false promises that they will be able to reduce or forgive the borrower’s student loan debt. Many of them have been promising things that are simply not legal and have been operating under several different names to avoid being caught, according the Federal Trade Commission (FTC).
One company is known as Financial Preparation Services, although they do go by several different other names. In fact, they appear in different variations on 25 web sites offering student loan debt relief services. In one client agreement entered in 2018, Financial Preparation Services charged $1,195 for document preparation services and $40 monthly for 20 years, which amounted to charging the borrower $10,555 total.
The FTC has filed nine civil cases against these types of student loan debt relief companies over the past two years. They are accusing these companies of illegally charging upfront fees for debt relief services, putting themselves out there falsely as government-approved service providers, and falsifying applicant information.
Here are some ways to spot a student loan debt relief scam:
- One of the strongest determinations of whether you are being targeted by a scam is when the company demands payment upfront.
- Another sign of a debt relief scam is the company will guarantee that all debts will be forgiven by creditors. No one can guarantee this, and if someone is making the effort to tell you that they can, odds are, they are part of a scam. Creditors are under no obligation to forgive debts.
- If someone offers to resolve your debt situation but insists that you pay them a large sum upfront, it is likely that this person is offering you a scam. A legitimate company will not force you to make a payment upfront.
According to a 2018 Brookings Institution report, approximately 40 percent of all student loan borrowers could default on their loans by 2023, so it comes as no surprise that borrowers are feeling the pressure. A reported 32 percent of all consumers filing for Chapter 7 bankruptcy are carrying some amount of student loan debt.
If you are approached by a company offering a debt relief deal that seems too good to be true, chances are it is, in fact, too good to be true. Always do your research first before signing on any agreement with a company offering debt relief services.
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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. There are ways to file for bankruptcy with student loan debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.