New York has taken some steps to stop student loan debt relief scams, but other states are going further. Notably, the attorney general of Illinois, Lisa Madigan, has filed additional lawsuits against student loan debt relief companies. Madigan made the news by suing two such companies in the middle of last year. Now there are five more.
As with the earlier lawsuits, the claims speak to the practices student loan consolidation scammers use: heavy advertising, appeals to their own expertise (which is nonexistent), the ability to stop wage garnishments or remove tax liens, and charging between $650 and $1,250 in upfront fees for bogus services.
Madigan also recently sent a letter to U.S. Secretary of Education Arne Duncan pressuring him to certify nonprofit credit counselors to give advice to student debtors regarding their circumstances and repayment options.
Although Illinois appears to be forging ahead on student loan debt relief scams, New York is not far behind. Early in 2014, Governor Andrew Cuomo created the Student Protection Unit within the state’s Department of Financial Services. It includes a brief warning to New Yorkers regarding student loan debt relief companies, and the unit subpoenaed thirteen debt relief companies operating in the state for “advertising materials, contracts, consumer disclosures, and fee schedules.” The unit emphasizes that applying to income-sensitive repayment plans for federal loan borrowers comes at no cost.
Student debt in the United States is a complex problem. Many debtors with federal loans are eligible for income-based repayment plans that cancel the loans after 10, 20, or 25 years. Some federal loans, PLUS loans made to parents, are not eligible for these programs. Debtors with private student loans that are not subsidized by the U.S. government may also not use these programs. However, some private banks, like credit unions, can refinance ineligible student loans at lower interest rates.
If you have substantial student loan debts, then you can look into an income-based plan on the Education Department’s Web site. If you have private loans or have been deemed ineligible, then it’s a good idea to discuss your situation with an experienced New York bankruptcy lawyer. Many student debtors in default owe other debts that can be discharged, freeing income for the student loans.
Just don’t give your money to a company promising loan consolidation for something you can do yourself.
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.