The skyrocketing rate of student loan debt and default has lead to an undesirable side industry: companies promising student loan debt relief services. Many of these companies promise an end to your student loan problems, or even the elimination of your student loans completely.
Unfortunately many consumers that already feel victimized by student loan collectors, may find themselves in even more trouble after paying for student loan debt relief services.
The Origin of Student Loan Debt Relief Services
For many years now, large debt relief agencies have thrived by making unreasonable promises to eliminate consumers’ credit card or medical debts. They often falsely promise to get rid of your debts, make your debts uncollectable, or lower payments to amounts that you can afford. In return, they often require significant up front fees or very high or extended monthly payments.
As more and more students incur student loan debt that they can’t pay, these debt relief agencies have transitioned to add student loan relief to the “services” that they offer, using the exact same business model they use for credit card debt relief.
The Problems With Student Loan Debt Relief Services
Student loan debt relief services often not only fail to deliver on promises, but do outright harm. They do this in a number of different ways.
Charging Large Fees for Services That You Can Do Yourself
Many of the services offered by these companies are simply government programs that you can apply for yourself. For example, many companies will offer to assist you with student loan consolidation, when in fact you can obtain easy-to-understand documents to consolidate your loans on your own from your servicer or debt collector.
Additionally, when companies offer to lower your student loan payments or principle, they usually just help you apply for long established government student loan repayment programs, which you can apply for on your own.
Offering the Same Solutions Regardless of Your Situation
Like many other legal areas, handling student loan problems can largely depend on your particular situation. The types of loans you have, payment amount, your income, tax filing status, or how current you are on payments, all must be considered in making decisions on how to handle student loan matters.
However, these companies often give little consideration nor weigh the pros and cons of taking actions on your behalf. These companies often automatically tell every consumer to take one course of action or the other, without concern as to whether a given course of action is the best choice for that consumer's individual situation. In many cases, applying for a program or submitting information can actually harm you, leading to higher payments or loss of certain legal rights.
Making Unreasonable Promises
Many companies will offer to completely wipe out your debt, or immediately lower your payments to an amount that you want to pay. They make these promises without knowing anything about your loan or your situation. In fact, many of the promises they make are absolutely impossible to fulfill.
Providing Incorrect Information
It’s natural that when asking questions about your student loan debt, you may have questions about bankruptcy, debt collection, or other related legal matters. Because many of these companies don’t have knowledge of these legal areas, they may provide incorrect legal information, rather than refer consumers to attorneys (or at least admit that they don’t know the answer to your questions).
Requiring Costly Long Term Contracts
Many student loan debt relief agencies will force you into signing long term contracts to make monthly payments to them. This is often to “assist” you in paying their high fees by allowing you to pay on a monthly basis. By doing so, they often hide the true cost of their services.
For example, $150 a month for student loan assistance may seem reasonable. But if you sign a two-year agreement, the $3,600 total you will pay is an extraordinary amount for the services they are providing to you, and more than most attorneys will charge you for the same service.
Debt Relief Services and Lawyers
Many consumers believe that if they are hiring a law firm, that they are safe from student loan debt relief agencies. Unfortunately, this is not so. Many larger companies employ lawyers as “in house counsel.” These lawyers are essentially fronts, to provide the agency an appearance of legitimacy.
There may be only one or two lawyers working for a company handling thousands of consumers’ student loan matters. Those lawyers may know little or nothing about student loan law, and nothing about your case. Often, they do not handle a single aspect of dealing with the student loan lenders.
Getting Help With Student Loans
If you need help with your student loans, here are some options:
Consult with a lawyer. Find a lawyer to assist you who is not associated with any debt relief agency. Sites such as www.naca.net or your local bar association, can provide referrals to real student loan lawyers. Many charge reasonable fees, especially compared to the outrageous fees charged by debt relief agencies.
Visit the Department of Education's website. The Department of Education’s website, www.studentaid.ed, has information about the various flexible repayment plans, calculators for estimating payments under various plans, how to apply for the various programs, and more. If you are having trouble with a particular student loan lender or collector, you can contact the Federal Student Aid Ombudsman Group.
Other information. The National Consumer Law Center's www.studentloanborrowerassistance is an excellent resource for information about student loans.