Stephanie Small - November 2013
As of March 2012, national student loan debt, at a total of 1 trillion dollars, has surpassed credit card debt. So it’s no surprise that companies have cropped up purporting to help struggling graduates manage their finances. But how do they work? Do they actually help? Or are they a bunch of scam artists?
The fact is, student loan borrowers may already have a number of options for loan repayment, including deferrals, forbearance, and consolidation. These options are granted by federal law. The problem: implementing these processes can sometimes be confusing. The National Consumer Law Center has found that student loan debt reduction companies often take advantage of this confusion in multiple ways. However, if you don’t have the time or desire to explore student loan debt reduction options yourself you may be interested in enlisting the help of a reputable service provider to help you manage the process. But let the buyer beware: if you do choose to seek help with debt reduction, keep your eyes open for the following tactics used by scammers.
Charging for something you could do yourself. This in and of itself is not illegal. In fact, it is how many industries work. However, some debt reduction companies insinuate that they are the sole path to helping you access these deferrals and consolidations, and neglect to inform you that you could do the same yourself with research and persistence.
Fees. If you are interested in using a debt reduction company, search around for the best rate. Some student loan debt reduction companies may charge very high fees. Some companies may charge several hundreds of dollars as an initial cost, followed by monthly fees, despite the fact that this process doesn’t require monthly maintenance.
Providing inaccurate information. In a recent report, the NCLC identifies multiple instances of various student loan debt reduction agencies providing inaccurate information regarding a number of topics, such as bankruptcy and garnishment. Some organizations claim to offer expert debt reduction counseling, but many may not deliver.
Student loan debt reduction companies with integrity do exist. If you choose to seek debt reduction help with one of these organizations, make sure you do your research first. Check their status at The Better Business Bureau’s website: http://www.bbb.org/us/. When interviewing them, steer clear of any organizations that quote high fees, imply that they’re the only ones that can help you consolidate, or ask you for your FAFSA PIN (the Department of Education warns all students not to share their FAFSA PIN with anyone).
If you are interested in exploring your student loan debt reduction options independently, check out these resources to help you get started.
Publishing Rights: You may republish this article in you website, newsletter, or book, on the condition that you agree to leave the article, authors signature, and all links completely intact.