Scam of the day – April 3, 2016 – Student loan debt relief scam stopped by the CFPB

With student loan debt up to 1.3 trillion dollars and many students defaulting on their loans, it is not a surprise that scammers are preying upon desperate former students looking for a way out of debt.  Last week, the Consumer Financial Protection Bureau (CFPB) shut down Student Aid Institute, Inc., a company that operated a student loan debt relief scam by which they lured borrowers into paying illegal fees for misrepresented services.    Scammers take advantage of students who may not be aware of their rights and options in regard to student loans.   Student Aid Institute, Inc. illegally charged upfront fees in violation of federal law that requires at least one debt to be renegotiated, settled or reduced before a fee can be charged.  In addition, the company misrepresented how much their customers would save, whether they were eligible for loan forgiveness whether they had been been pre-approved for specified programs and whether fees were required to participate in the federal programs.  In addition, the company falsely implied through its advertising that it was affiliated with the Department of Education.    Student Aid Institute, Inc. entered into a Consent Agreement with the CFPB putting the company out of business as well as imposing a civil penalty.  Here is a link to the Consent Agreement.  http://files.consumerfinance.gov/f/201603_cfpb_consent-order-student-aid-institute-inc-steven-lamont.pdf

Part of the problem is that many people seeking student loan debt relief do a search on Google or other search engines which turns up advertisements for scam student debt relief companies at the top of the first page.  The CFPB has asked Google  and other search engines to enable searchers to more readily be directed to the U.S. Department of Education’s website where much helpful information is available to help people seeking debt relief without having to pay exorbitant fees for the information.

Meanwhile the fact is that, according to government studies, 70% of those people in default of their loans actually qualify for income-based repayment plans, but many people are not aware of that fact or how to apply for these programs.  A  recent General Accountability Office (GAO) report faulted the Department of Education for not making people more aware of their repayment options.

TIPS

If you find yourself having difficulties repaying your student loans the first place to turn is the website of the Department of Education which has much information about programs that may provide tremendous assistance without having to pay hefty fees.  Here is the link for the Department of Education’s website section dealing with student loans.  http://www2.ed.gov/fund/grants-college.html?src=go

If you were a customer of Student Aid Institute, you may need to take action in order to maintain your enrollment in certain federal loan repayment plans by contacting your loan servicer immediately.  If you do not know who is your loan servicer, you can get this information  by calling the Department of Education at 1-800-4-FEDAID.

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