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Mason City, IA 50401

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Home Blog Are You Aware of this Student Loan Debt Relief Scheme?

Are You Aware of this Student Loan Debt Relief Scheme?

Are You Aware of this Student Loan Debt Relief Scheme?

It’s a staggering number. More than 42 million Americans owe a total of nearly $1.5 trillion in student loan debt. It’s no wonder people look for help. But not all help is legit. Scammers are targeting borrowers with student loan debt relief schemes that can actually make things worse. 

In a new case announced recently, the Federal Trade Commission (FTC) alleges the operators of Mission Hills Federal and Federal Direct Group bilked borrowers out of more than $23 million. The FTC says these companies lured people with false promises to pay down student loans and lower monthly payments. According to the FTC, the companies also lied about taking over the servicing of the loans, which tricked people into submitting loan payments directly to them. In fact, the defendants diverted borrower payments to themselves.

What’s more, many of these borrowers went months, sometimes years, before learning their student loans weren’t being repaid. Why? The FTC says the defendants made people give their federal student aid IDs, or other personal information, to enroll in the debt relief program. They used that information to change borrowers’ contact information on U.S. Department of Education websites, which limited the borrowers’ contact with their federal loan servicers.

Scammers use these tactics:

  • They promise fast loan forgiveness. Before they know your situation, scammers might say they can quickly get rid of your loans through a loan forgiveness program. But they can't.
  • They ask you to pay a fee up front for help. It's illegal for companies to charge you in advance before helping you to reduce or get rid of your student loan debt. Companies that make you pay upfront might give you no help and not give your money back.
  • They pretend to be affiliated with the government and use a fake seal. Scammers use official-looking names and logos and say they have special access to certain federal programs. They don't.

Watch this video and learn tips to help avoid student loan debt relief scams:

 

If you or someone you know feels overwhelmed by student loan debt, know this: There’s nothing a company can do for you that you can’t do yourself for free. If you have federal student loans, start with StudentAid.gov/repay. If you have private loans, talk with your loan servicer. For more information, check out ftc.gov/StudentLoans

Article content provided by Colleen Tressler, Consumer Education Specialist for the Federal Trade Commission

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