Educate Yourself about Student Loan Programs to Avoid Scams, Says BBB

July 17, 2014

Editor’s Note: We have victims willing to speak to the media.

The excitement and promise of attending college and getting a degree too often turn into heartache and regret for students, parents or others involved in the application and payment process when they are not careful to avoid financial aid traps and outright scams.

“The key to not being caught up in a financial aid scam is to check up on any offers and the companies offering them before signing any documents,” explains Steve J. Bernas, president and CEO of the Better Business Bureau serving Chicago and Northern Illinois.

 “We applaud the work of Illinois Attorney General Lisa Madigan,” stated Bernas, “in filing lawsuits against debt settlement firms that allegedly engaged in deceptive marketing practices and illegally charged consumers hundreds of dollars in upfront fees to reduce or eliminate their student loan debt burden. All this for services that Attorney General Madigan rightly said student loan borrowers can obtain themselves through government programs at no cost.”

The Chicago BBB has received multiple complaints for a credit-debt consolidation company that is based in Carrolton, Texas. The company name is Broadsword Student Advantage, LLC. It has a BBB rating of an F and has 52 complaints in the last 12 months.

In addition to this company, Madigan also filed a lawsuit against the Chicago-based credit-debt consolidation company, First American Tax Defense LLC.

Chicago resident, Evangeline Allen, was one of the victims of Broadsword Student Advantage, LLC. She says, “They promised that they could help me. I could tell right away that they were not going to get me anywhere with this and I asked for a refund. I was supposed to keep paying them monthly for the duration of the loan. They kept promising a refund and it kept taking longer and longer. They gave me dates and never stuck to them. They even started to get rude and nasty. They finally refunded my money after I contacted the Better Business Bureau.”

Bernas noted that whenever people are interested in applying for any type of loan they need to do some homework first. He stressed the importance for people to avoid problems and scams up front, rather than getting trapped, then regretting and filing a complaint later.  

“It is always a good idea to look up the rating and read of the Business Review on the BBB website about any company you’re looking to do business with,” said Bernas.  “This is especially true when dealing with loan firms, which have specific laws governing their operation.  Information and links to this information are available on the website.”

In general, the BBB recommends the following tips to avoid financial aid and loan scams:

Do Not Pay Advance Fees.  In Illinois it is illegal for debt relief companies to charge upfront fees before providing services.

There Are No “Special” Deals. Debt relief companies do not have the ability to negotiate with your creditors in order to obtain a “special deal” under these federal student loan programs.

Look Out For High-Pressure Tactics. Beware of companies that pressure you into a plan or make any guarantees without looking into your specific needs.

Always Check It Out First. Research the company and the services it offers. It is better if it offers a wide range of options and education on how to handle debt.

Government Repayment Plans. There are government-approved repayment plans, including Income-Based Repayment (IBR) plans. Payment levels under IBR and other federal income-driven repayment plans are set by federal law.

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The BBB is a non-profit, non-governmental organization.  It is supported by businesses to protect consumers against scams and other unethical business practices.  The group accomplishes this by educating both consumers and businesses, and by highlighting trustworthy businesses. By developing reports and ratings on businesses and charitable organizations, the BBB encourages people to use these as resources and referrals to utilize the free services before making a purchase or donation. The BBB helps resolve buyer/seller complaints through its alternative dispute resolution process. In 2013, the BBB provided more than 22,600,000 instances of service.  Over 80 percent of consumer complaints to the BBB were resolved. The Better Business Bureau serving Chicago and Northern Illinois is a member of the international BBB system that services the United States, Canada and Mexico.