If you have thousands of dollars of student loan debt hanging over your head the promise of debt reduction can be very appealing.
But federal and state investigators say a lot of the companies that promised to help with student loan debt were really scams designed to trick people into paying more than $95 million in illegal fees.
Investigators say the companies used telemarketing, interent ads and social media to prey on people who were struggling to pay off student loan debt.
“I thought they were helping me.” said debt relief scam victim Matt Dixon.
Dixon signed up with a student loan adjuster more than 2 years ago. He learned about the company from a co-worker.
He says almost everything was done by email, including arrangments for automatic payment of special fees.
The company explained they could lower his student loan payments, and potentially get some of his debt forgiven, but he had to pay $500 up front.
“Yes. 500 bucks.” said Dixon. “I paid that.”
Dixon said when he signed on with the adjuster in July 2015, he also had to agree to pay $39 a month, in addition to his lower student loan payments which went from around $600 to $170 per month.
But investigators say the fees were both excessive and illegal.
In a nationwide crackdown involving the Federal Trade Commission and 11 state Attorneys General, Operation Game Of Loans identified a pattern of illegal upfront fees, illegal monthly fees, false promises of loan forgiveness and false claims of government affiliation.
Matt Dixon’s student loan balance was $60,000 when he signed up with the debt relief company. 2 years later, after he learned of the state’s investigation, he discovered his loan balance had climbed to $63,000.
Because the payments were automatically withdrawn from his bank account, he admits he never checked his online student loan account to monitor the balance. He acknowledges the oversight.
It turns out none of his payments went to the principal balance. He’d been put into an interest only loan, which caused his balance to balloon with interest charges.
Washington state played a major role in the nationwide crackdown.
Court records show 13 of the 36 court actions nationwide were in the state of Washington.
Local investigators helped shut down 26 out of state adjusters. The state Attorney General’s office has recovered more than $1.5 million dollars in illegal fees since 2015.
Attorney General Bob Ferguson’s staff reports $230,00 in refunds has been returned to local consumers since January of this year.
“Too mamy companies seek to profit off student borrowers drowing in loans, desperately seeking a lifeline.” said Ferguson in a statement to KOMO News.
The AG’s office urges consumers to review its Studen Loan Guide.
Dixon sayshe didn’t even know he was being scammed until a state investigator contacted him last spring.
Matt Dixon says he was able to get out of the bad loan aggreement, and get back nearly a thousand dollars in fees he was illegally charged.
The concern now, is that other illegal companies will pop up to replace the deceptive debt relieft operators that were shut down.
Bottom line: walk away from any debt relief company that requires you to pay hundreds of dollars in up-front fees in order to get help.
In most cases, you can get help and advice for free- from the U. S. Department of Education.