Beware of Student Loan Counseling Scams

As student loan debt continues to be the single largest form of consumer debt, it is no surprise that scammers have been hard at work targeting vulnerable borrowers strapped with unmanageable student debt. MMI is happy to report that government agencies have begun fighting back against student loan debt relief schemes. In fact, the Consumer Financial Protection Bureau (CFPB) just announced recent legal activity aimed at stopping two student loan consulting firms from providing services that are harmful to consumers.

More than 40 million young Americans are currently responsible for paying back student loans, averaging nearly $30,000, and more and more students are relying on loans and other forms of credit to pay for their education. As a nonprofit financial counseling provider with more than 50 years of experiencing helping families manage debt, we understand the long-term impact of the current student loan crisis, and support the CFPB and other government agencies’ in their efforts to protect struggling student loan borrowers.

If you are one of the millions burdened by student loan debt and are seeking help, beware of debt relief scams and consider the following warning signs offered by the CFPB:

  • Pressure to pay high up-front fees. Federal student loan repayment programs are available to you for free, so stay clear of for-profit companies requiring unusually high fees for services and who do not explain the free services available to you.
  • Promises of immediate loan forgiveness or debt cancellation. The U.S. Department of Education determines the benefits and eligibility requirements for available federal student loan repayment programs. Debt relief companies do not have the ability to negotiate with your lenders for a “special deal” under these government programs.
  • Demands that you sign a “third party authorization.” You should be wary if a company asks you to sign a “third party authorization” or a “power of attorney.” While it may be tempting to hand your debt problems over to someone else, the Department of Education has made it as easy as possible for you to obtain a loan modification and other repayment options without third-party legal documentation.
  • Requests for your Federal Student Aid PIN. Be cautious about companies that ask for your Federal Student Aid Personal Identification Number (PIN). Your PIN serves as your electronic signature and provides access to your personal records, so you should never give your PIN to anyone.

If you think you are a victim of a student loan debt relief scam, call the CFPB at 855.411.2372. To get help through MMI’s Student Loan Counseling program, call 866.465.1911.

Tanisha (Warner) Smith is a former communications manager at MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.