Student loans are a serious and growing burden for American households, so it’s unsurprising that student loan scams are proliferating. Debtors who pay substantial sums to people fraudulently offering to help them with their federal student loans might be forced to file New York bankruptcy. The issue cropped up earlier this year when the attorney general of Illinois sued two such alleged scammers. Now it appears the Consumer Financial Protection Bureau (CFPB) has found two more companies engaged in similar practices.
One of them, the innocuously named College Education Services, targeted people who had defaulted on federal student loans. Via Web sites like “CollegeDefaultedLoans.com” and “HelpStudentLoanDefaults.com,” it claimed to help debtors but allegedly charged upfront payments, which is illegal. The CFPB also claims it falsely promised to lower monthly payments by up to 50 percent and help people obtain relief from defaults or garnishments.
The CFPB also sued “Student Loan Processing.US,” which operates in California and Texas. It too allegedly charged illegal advance fees before providing any services. It also supposedly represented an affiliation with the U.S. government by using a logo bearing a resemblance to U.S. government seals. Much like companies offering free credit reports but charging monthly service fees, “Student Loan Processing.US” charged $39 monthly payments as a fee and not to help people pay off student loans.
The CFPB’s press statement on the two debt relief companies can be found here.
These two operations made surprising amounts of money, suggesting that debtors are still unaware of alternative options for repaying their federal student loans. One example that’s gaining popularity is the Pay-As-You-Earn (PAYE) program, which caps federal student debtors’ monthly payments based on their incomes. This program applies to most types of federal loans except Parent PLUS loans. Administrative (i.e. non-bankruptcy) hardship discharges can also be helpful to student debtors who cannot work.
New York bankruptcy can also help student loan debtors. A chapter 13 filing can give debtors time to find work, and sometimes private lenders don’t object to discharging student loans. Chapter 7 can help debtors discharge other debts and shift income to paying down the remaining student loans. Talking to a New York bankruptcy lawyer is certainly better than giving money to a con artist.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced fair debt collection practices act Bruce Weiner for a free initial consultation.
