Resolution Will Pay $19M To 23K Student Loan Borrowers
By: Jenny Montoya · December 16, 2022 · Reading Time: 3 minutes
It’s a confusing time for student loan borrowers. With the Federal Student Loan Forgiveness program tied up in the courts, and many borrowers currently in limbo, consumer advocacy groups are warning individuals to be aware of potentially false or misleading communications concerning debt relief programs and student loan forgiveness.
Just this week, a federal consumer watchdog announced that a settlement was reached, setting aside $19 million in compensation to resolve debt relief fraud claims. This is welcome news for 23,000 student loan borrowers affected by the allegedly predatory practices of certain student loans debt relief companies.
How It Happened
According to the Consumer Financial Protection Bureau, a federal agency that oversees the financial services industry, these instances took place between 2015 and 2017. The CFPB claims five student loan debt-relief firms misrepresented their ability to lower borrowers’ interest rates and improve their credit scores. Borrowers were also falsely told the US Department of Education would become their loan servicer.
The $19 million resolution comes after a court entered a default judgment against the five companies last year. The CFPB released a statement urging anyone with questions related to the case to call 1-877-899-2926 or email [email protected] .
According to the Education Department, there are key ways to spot and avoid student loan forgiveness scams. These include watching out for suspicious language indicating you’ve been “flagged” or pre-selected for student loan forgiveness, as well as pressure tactics or phrases such as “act immediately.”
Other unreasonable requests and red flags include companies looking for high up-front fees and monthly maintenance charges, or requests for the login credentials to your online accounts.
The student loan landscape is constantly changing, and remains somewhat confusing as a result. But that’s all the more reason to remain vigilant in protecting yourself against potential scams.
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