More than 40 million borrowers are carrying an estimated $1.5 trillion in student loan debt. With that many individuals carrying student loan debt, it should come as no surprise that many scams are out there, hoping to take advantage of borrowers who are desperate to get out of debt quickly. Borrowers need to be aware of these debt relief scams in particular, which are now facing investigation by the Federal Trade Commission (FTC).
Student Loan Debt Elimination Scams
Many companies are out there offering the promise of eliminating student loan debt for borrowers who are desperate for a way out. However, if someone is offering a deal that sounds too good to be true, that is usually because it is, in fact, too good to be true. Many companies will promise to wipe away a person’s loans when they have no actual ability to do so. The fact of the matter is no one can promise student loan forgiveness or cancellation. Student loan borrowers can only ever receive forgiveness if they meet very specific conditions, and the fastest any borrower can receive loan forgiveness is five years. Even these forgiveness programs can be very difficult in terms of qualifications.
If the borrower has federal student loans, it should be noted that no student loan debt relief company can negotiate directly with the federal government to obtain lower rates on those loans. If a company promises the ability to negotiate a lower payment, this can normally only be done via an income-drive repayment plan, but most of these can be applied for directly by the borrower, not a third-party entity.
Advanced Fee Requirement
A growing number of scams exist where a company offers to reduce the borrower’s student loan payments or even obtain total loan forgiveness if the borrower pays them an upfront fee or enters into an agreement to pay monthly fees. However, according to the U.S. Department of Education, it is illegal to charge upfront fees or to charge a monthly fee for this type of assistance. Any time a company requires money upfront to do any work, this request is a good sign that the company is not legitimate and is looking to only make money off of the borrower’s misfortune.
Loan Consolidation Scams
Other scams take advantage of borrowers by saying they can consolidate student loans into one manageable payment with one lender at a hopefully lower interest rate. While consolidation can be an excellent strategy for paying down student loans, many of these less-than-reputable companies will say that they can do this for a high fee paid upfront while accomplishing nothing for the borrower. Consolidation can be done without the assistance of another party, and the consolidation company should be properly vetted before proceeding. It is important that the borrower does his or her research before entering into any consolidation agreement to ensure that the lender is legitimate.
Always Ask the Hard Questions
If a company is reaching out to a borrower with promises of making his or her life easier, it is best to approach the offer with caution and even a bit of skepticism. Always ask the hard questions, starting with why the company is offering to help the borrower. Properly research the company online and with the Better Business Bureau to see if they have a history of running debt relief scams and look into what other borrowers have experienced.
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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.
