For several years now, Americans have owed more in student loans than any other type of consumer debt other than mortgage debt. At the same time, student-loan relief scammers have popped up to take advantage of borrowers. Student loans may be difficult to discharge in a New York bankruptcy, but debtors can at least avoid bankruptcy by staying clear of scammers. Recently, the Federal Trade Commission and state attorneys general have joined consumers to crack down on student-loan relief scammers who stole $95 million from debtors in illegal fees. Here are details on their efforts and additional resources for avoiding these scams.
Dubbed, “Operation Game of Loans,” the FTC and state agencies have sued five new scammers in addition to two earlier cases, one resulting in a judgment in favor of the FTC and the other a preliminary injunction. Although the cutely named operation is really just a public-relations initiative more than anything else, it is the first effort between federal and state agencies to target student-loan relief scams. New York, however, is not among them.
The defendants in these actions engaged in a variety of illegal practices, charging upfront fees being the most prominent. They also claimed they would reduce borrowers’ payments and interest rates, and they promised debtors their loans would be forgiven. Some of them charged monthly fees that would be credited to borrowers’ loans but were not. A few also impersonated the Department of Education, either by claiming so outright or by using the department’s insignia on its Web pages. They also didn’t limit themselves to student-loan relief scams but also dabbled in mortgage relief and non-existent credit-repair services.
More important than the FTC’s legal actions, the agency has updated its Web site’s pages relating to consumer education and debt-relief scams. It recommends borrowers avoid anyone claiming quick loan forgiveness and be wary of official-sounding names and government seals because they might be forged. As with many scammers, they use hard-selling tactics, and ask for information that borrowers shouldn’t give, notably their Federal Student Aid IDs. The FTC’s site is here, and its press release regarding “Operation Game of Loans,” is here.
So long as student loans continue to weigh down debtors, scammers will try to take advantage of them, and government agencies will have to stay right behind them. In the meantime, debtors have options for dealing with student loans: applying for forbearances, deferments, administrative discharges (when applicable), and income-driven repayment plans. Contacting lenders about these options will accomplish more than paying scammers.
If you owe significant student loans, then talking to an experienced New York bankruptcy lawyer can also help. Bankruptcy can free up income from other debts for student loans, and chapter 13 offers its advantages as well.
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 Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.