College students are graduating with the highest debt levels in history. Graduates with a bachelor’s degree in 2012 had an average student loan debt of $29,400. Student debt loads have ramped up 6 percent every year since 2008, and the number of students who have to borrow money to attend college is rising. Statistics show that 37 million Americans have outstanding federal student loans.
As this debt snowballs, some companies are trying to profit off borrowers through debt-relief services. For a price, these businesses promise to help individuals save money by restructuring their debt. These services, however, are usually available for free through federal student repayment plans. A report last year from the National Consumer Law Center found several problems with debt-relief companies. These include charging exorbitant fees, mischaracterizing government programs as their own, falsely claiming government affiliations, and discouraging borrowers from handling their own cases.
In response to these controversial services, New York Gov. Andrew Cuomo established a Student Protection Unit to serve as a consumer watchdog for student borrowers. So far, it has served subpoenas on 13 student debt-relief providers. These businesses allegedly charged borrowers high enrollment fees for services available at no charge from the U.S. Department of Education.
Borrowers struggling to repay federal loans should find out if they qualify for a federal repayment plan. The newest plan, Pay As You Earn, lets borrowers make monthly payments of no more than 10 percent of their discretionary income. This helps eligible students repay their loans based on what they earn, not what they owe.