Two schemes that allegedly defrauded student-loan borrowers of millions of dollars after promising them debt relief have been halted by a federal court, the Federal Trade Commission (FTC) announced on Monday.
It’s easy to feel like a Sisyphus pushing his rock if you’re paying off a student loan in the US – it usually takes years to see a zero balance.
The US Department of Education said on Monday that it has approved $42 billion in student loan forgiveness for more than 615,000 public service workers since October 2021. But the problem is much larger. In total, Americans owe just under $1.76 trillion in student loan debt.
Unsurprisingly, many turn to debt relief companies that promise they will lighten the debt load – for a fee, of course. However, the FTC has now said this was not the case – the scammers’ schemes “leave people deeper in the hole.” Two examples were given.
According to the FTC complaint filed in federal court in California in April, two companies falsely claimed they were affiliated with the Education Department and told borrowers they would take over the servicing of their student loans.
A judge last week froze the assets of the companies and their owners – BCO Consulting Services, SLA Consulting Services, and SL Finance – and put a temporary restraining order in place before a court can consider the cases.
These schemes have bilked students out of approximately $12 million by using deceptive claims about programs that simply did not exist. Consumers were tricked into believing their loans would be at least in part forgiven – in reality, scammers were pocketing the payments that were, in essence, illegal upfront fees.
One of the companies also violated the Covid-19 Consumer Protection Act by misrepresenting that their program was part of the CARES Act or a similar Covid-19 relief program.
“As Americans struggle with massive student loan debt and uncertainty around the prospect of forgiveness, scammers are looking to cash in,” said Samuel Levine, Director of FTC’s Bureau of Consumer Protection.
“These lawsuits to shut down student loan debt relief schemes continue the agency’s crackdown on junk fees, unwanted calls, and financial exploitation.”
The FTC pointed out that Americans don’t actually have to pay for help managing their student loans. Free help for dealing with federal student loans can be found at StudentAi.gov/repay, and if your loan is private, going directly to the loan servicer is the right step.
President Joe Biden’s administration is worried about this kind of deceit. The White House launched an education campaign to raise awareness about scams in October.
“If you get any questionable calls, please tell us,” Biden said at the time. “My message to fraudsters trying to cheat the American people is: Don’t do it. We’re going to hold you accountable.”
More from Cybernews:
Subscribe to our newsletter