Scammers are targeting people with student loan debt
Many college graduates — from young adults to those looking toward retirement — feel like they’ll never escape their student loan debt. According to Student Loan Hero, Americans have a cumulative total of over $1.5 trillion. The website says that the average amount of student loans for students who graduated last year was nearly $30,000. It’s been estimated that as many as 40% of people with outstanding student loans could default on them by 2023
Unfortunately, people anxious to get some relief from this crushing debt can sometimes fall victim to debt relief scams — and there are plenty of them. The Wall Street Journal recently did an investigative report on these scams and the companies behind them. Typically, they attract their victims online with promises of helping them reduce their debt or even have it forgiven.
The Journal found that one company, Financial Preparation Services, actually had over 25 websites that were “purportedly different companies offering student-loan debt-relief in the last four years.” They found that according to one of the company’s client agreements, a person who hired them could end up paying over $10,000 over the course of nearly two decades.
The federal government is aware of these debt relief scams. The Federal Trade Commission (FTC) has filed nine cases in civil court. Defendants are accused of things like falsely claiming to be approved by the government, charging upfront fees illegally and falsifying information on applications. Regulators say that even debt relief companies that operate within the law often charge clients for services they could obtain at no charge elsewhere.
It’s currently difficult to discharge student loan debt in bankruptcy. However, that debt often contributes to a person’s overall financial problems. One study found that nearly a third of people who file for Chapter 7 have student loan debt.
If other debt can be discharged through Chapter 7 bankruptcy, it can make student loan debt payments more manageable. If you’re considering this option, it’s wise to talk with an experienced bankruptcy attorney.