Today, we took action to stop two student loan debt relief scams that illegally pressured borrowers to prepay federal loan benefits. In a joint lawsuit with the Florida Attorney General, we shut down a student loan debt relief company called College Tuition Services and separately sued StudentLoanProcessing.US for operating an illegal debt relief service. We allege that both companies preyed on high-risk student loan borrowers, made false promises about their debt relief services, and charged illegal prepayment fees.
We warn student loan borrowers who are having trouble managing their student debt to be wary of scams by so-called “student debt relief” companies. These companies target borrowers who are in trouble and having trouble figuring out what’s next. In some cases, borrowers believe their student loan servicer can’t help them and that they can’t turn to a third party for help. Others are deceived by marketing practices that target the most vulnerable student loan borrowers.
In many cases, these companies promise to save you thousands of dollars in student debt by claiming special expertise or falsely claiming a relationship with the Department of Education, only to enroll you in a payment plan that is free to all federal student loan borrowers — all for a few hundred dollars or more. In other cases, these companies fail to deliver on their promises, leaving you with more debt and time to avoid financial crisis or default.
Last year, we warned that you shouldn’t pay someone to help you pay off your student loans. You should also know these warning signs to help you avoid student loan debt relief scams, as well as information about getting help if you become a victim of this scam.
Warning signs that a student loan debt relief company is trying to rip you off:
Pressure to pay high upfront fees. When a debt settlement company asks you to pay upfront or tries to get you to sign a contract on the spot, it could be a sign of a scam. These companies may ask you to provide a credit card number online or over the phone before explaining how they can help you. Steer clear of companies that ask for payment before doing anything, especially if they try to get your credit card number or bank account information. Not only can you get free help through your student loan servicer, but it is generally illegal to charge for debt relief services before you get help.
Immediate loan relief or debt cancellation commitments. Debt relief companies do not have the ability to negotiate with your lender for “special deals” on these federal student loan programs. Payment levels on existing payment plans are set by federal law, and for most borrowers, loan relief is only available through plans that require multiple years of qualifying payments.
It will ask you to sign a “Third Party Authorization.” Be careful if a company asks you to sign a “third party consent” or “authorization.” These written agreements give you the legal authority to speak directly to your student loan servicer and make decisions on your behalf. In some cases, you can request that you pay the service provider directly and promise to pay them monthly when payments are due.
Federal Student Aid PIN Requests. Be wary of companies that ask for your Federal Student Aid PIN. Your PIN (a unique identifier issued by the U.S. Department of Education to access federal student loan information) is equivalent to your signature on documents related to your student loan. If you provide this number, you are authorizing the company to act on your behalf with respect to your student loans. Honest companies will work with you to develop a plan and will never use your PIN to access your student loan information.
How to get help
If you are a victim of student loan debt fraud or are being processed by a student loan servicer, please file a complaint online or contact us at (855) 411-2372. You should also instruct your student loan servicer to only provide information about your student loans directly to you.
If you have questions about paying off your student loans, check out Paying Off Student Debt to learn how to resolve your debt—even if you default. You can learn about your options and what to ask specifically when a company tries to charge you. Another great resource you can visit is Ask the CFPB for Answers to More Student Loan Questions.
Even if you fall behind, you may have options.
There are some federal student loan repayment programs that can help you remove the default status from your credit report. Before you pay a high fee for something that doesn’t meet your expectations or that you can get for free, make sure you understand what’s in our tool.
Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about the work we do on behalf of students and young Americans, visit Consumerfinance.gov/students .
