Companies That Offer Help With Student Loans Are Often Predatory, Officials Say

July 14, 2014
New York Times 
student loan news
The explosion of student loan debt in the last decade has spawned a new source of customers for the debt settlement industry, which traditionally has targeted credit card and mortgage borrowers. The firms often promise to help borrowers lower their monthly payments for an upfront fee or erase their debt, but they may use questionable tactics.

Illinois is poised to become the first state to bring legal action against debt settlements in connection with student loan practices. In separate lawsuits, state Attorney General Lisa Madigan contends that Broadsword Student Advantage and First American Tax Defense duped borrowers into paying for help they never received. She argues that the firms lured student loan borrowers into paying hundreds of dollars upfront, often misled them about those fees, and falsely claimed an affiliation with government relief programs. Customers also were sometimes charged for debt assistance they could have received free from the Education Department.

U.S. borrowers have lodged hundreds of thousands of complaints with the Federal Trade Commission about debt settlement and collection companies. In 2013, the number of gripes reached 204,644. Their promises to lower debt payments rarely come through, and often the borrowers damage their credit in the process.

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