As 20 million college students head back to U.S. colleges this fall, more than 44 million others are struggling to pay off an estimated 1.5 billion in student loan debt. It is well established that debts play a large role in divorce cases, and student loan debt can be one of the biggest obstacles to achieving financial stability after a divorce.
To avoid making that debt problem worse, student loan borrowers must avoid debt relief scams that use fraudulent claims to convince borrowers that they can help alleviate their financial distress. The scams commonly use text messaging and other social media advertising to convince debtors that they are affiliated with the U.S. government, that their loans can be forgiven or deferred, or that they are eligible for affordable repayment programs, when all such claims are false.
In reality, these scams victimize borrowers by increasing their debt and harming their credit. Two years ago, the Federal Trade Commission, with the help of 11 state Attorneys General, including the Washington State AG, filed a nationwide sweep of 36 lawsuits with the goal of shutting down dozens of relief scammers. More recently, these cases have settled or resolved with consent judgments which reveal success in halting some scams, but not much success in returning funds to consumers who paid for services and got nothing in return except more debt. The FTC documented $95 million in illegal fees paid by consumers. One scammer alone took more than 9 million dollars from student loan borrowers, but the settlement reveals that the FTC suspended the monetary judgment after recovering only $54,000. So the resolution of this problem is not through lawsuits. Student loan borrowers must be educated about their options to address student loan debt and know where to seek real help.
Student Loan Support and Education
Consumer advocates are promoting the use of state Ombudspersons to provide student loan borrowers with accurate information and assistance. Luckily, Washington State is one of the few states that has started a Student Loan Advocacy Program. The program does have an advocate that can answer questions, but the website has nothing about student loan debt scams, other than links to federal agency websites.
The best resource for educating yourself in order to avoid this type of scam is the FTC website. They offer this advice:
Consumers should remember that only scammers promise fast loan forgiveness, and that scammers often pretend to be affiliated with the government. And consumers should never pay an upfront fee for help, and should not share their FSA ID—a username and password used to log in to U.S. Department of Education websites—with anyone.
Consumers can apply for loan deferments, forbearance, repayment and forgiveness or discharge programs directly through the U.S. Department of Education or their loan servicer at no cost; these programs do not require the assistance of a third-party company or payment of application fees. For private student loans, contact the loan servicer directly.
Repayment Options and Avoiding Scams
Another great resource is provided by the Illinois AG, who gives step by step directions to researching your repayment options and avoiding scams. The best non-governmental organization working to help educate borrowers is The Student Borrower Protection Center, whose website is a wealth of helpful information. When debt issues are overwhelming and cause partners to end their marriage, the Seattle divorce lawyers at Molly B. Kenny, LLC are ready to help you create a workable plan for your future independent financial stability.