Government officials are warning that many debt settlement companies are beginning to take advantage of Americans with hefty student loan debt.
In the past, debt settlement companies often focused on people with credit card and mortgage debt, but today they see the nationwide surge in student loan debt as a potential gold mine.
In fact, Americans now owe $1.2 trillion dollars in student loan debt, and many borrowers simply cannot afford to pay back the educational loans they have taken out.
The Consumer Financial Protection Bureau reports that seven million people in Wisconsin and the rest of the United States have already defaulted on their student loans, and the number continues to grow each month.
In many instances, people who took out loans to attend college did so with the expectation that it would pay off in the long run by allowing them to eventually earn more money. However, many recent graduates are now working low-paying jobs that don’t require the advanced degrees they worked hard to obtain.
Oftentimes, debt relief companies promise to lower monthly debt payments in exchange for a large up-front fee. Some of the companies even pretend to be associated with federal debt relief programs even though they are private, for-profit companies.
So far, one state in the Midwest already plans to crack down on the predatory practices. The attorney general of Illinois has filed suit against two debt relief companies for shady student loan practices, including misleading borrowers about the fees they were charged and charging for assistance that could have been obtained for free through the U.S. Department of Education.
Ultimately, people need to be cautious when looking for help with overwhelming student loan debt. The best option is to find a reputable bankruptcy law firm in your area that provides services regulated by the state bar association.
Source: The New York Times DealBook blog, “Companies That Offer Help With Student Loans Are Often Predatory, Officials Say,” Rachel Abrams and Jessica Silver-Greenberg, July 13, 2014