BBB warns consumers to beware student loan forgiveness claims

  
     
April 18, 2017

If you have student loan debt, Better Business Bureau is advising consumers to be cautious when dealing with businesses popping up all over the U.S. claiming to help clients reduce or eliminate this financial obligation.

Advertising on TV and the radio, several of these businesses claim they can completely erase a client’s student loan debt, even though such loan forgiveness is rare. In addition, BBB is concerned these businesses could be violating federal law by taking upfront fees for its services.

BBB is warning consumers should be wary of any company that claims special expertise in reducing student loan debt, especially if the business demands upfront payments without first taking action that reduces the financial burden.

Federal law requires that at least one debt be renegotiated, settled or reduced before a fee can be collected for debt relief services.

According to BBB reports, federal prosecutors have been very aggressive in going after so-called student debt relief companies in recent years, as these schemes have taken millions of dollars from consumers who are desperate to reduce or eliminate their student loan payments.

BBB has become aware of these businesses nationally after prospective clients became suspicious of what the client saw as promises that seemed “too good to be true,” claiming in some cases to be able to eliminate the debt completely and paid money, only to have the debt remain or go into default.

BBB offers the following tips to consumers hoping to reduce their student loan debt:

  • Start With Trust®. Check out all businesses at bbb.org.
  • Be proactive. If you’re interested in consolidating your existing student loans, contact the Loan Consolidation Information Call Center at 1-800-557-7392 or log in with your FSA ID at www.studentloans.gov. Remember, you don’t need the assistance of any company to consolidate your loans, but you do need to know if you’re eligible to proceed with consolidation.
  • Do not let anyone instruct you to stop making loan payments unless you work out terms directly with the company managing your loans.
  • Make sure you understand any offer made by these businesses and be wary of verbal promises. Never agree to anything over the phone. Ask the company to send you their offer in writing. From there, contact your loan servicing company, your school’s financial aid office, the Department of Education or your state’s office of higher education to make sure the offer is legitimate.
  • Ask what service the company is providing. Some companies say they can offer “relief” for student loan holders. However, all they do – for a fee – is work with your loan servicer to secure a temporary deferment or forbearance. These options are something borrowers can seek for free.