No relief: 36 student loan debt relief companies accused of deceiving consumers
Author: Erica Proffer, Joe Ellis
Published: 10:16 PM CST February 1, 2018
Updated: 10:16 PM CST February 1, 2018
DEFENDERS 5 Articles

Americans are $1.36 trillion in student loan debt, according to the New York Federal Reserve.

The average American carries $32,731 in student loan debt.

Many companies promise to help manage and lower your payments, but some don’t always keep that promise.

The KVUE Defenders investigated the problem in Austin. They found at least 100,604 Austinites have student loan debt, according to marketing data distribution firms.

This is how debt relief companies find you.

Your information is for sale to companies who know you’re vulnerable. And sometimes, those companies leave you with no relief.


No relief: 36 student loan debt relief companies accused of deceiving consumers

Chapter 1

A single mother's promise

Renee Hartley thought she finally had a way to lower her student loan payment. The single mother needed a break.

“I went to school, bachelor and master’s degree. So, the student loans accumulated. The payments became bigger and bigger,” Hartley said.

The bill was more than $500 each month. She started looking for ways to lower payments.

She found “Student Loan Relief” services, a Dallas-based business.

“They seemed really caring and involved,” Hartley said.

The company sent Hartley a letter saying the company is now a “non-profit” and that she’s eligible for a lower rate as a single mother.

Hartley was excited. She recommended two of her friends to sign up.

“I didn’t have any real suspicion to think that anything was wrong,” said Hartley.

Then, she saw her credit report.

She was in default from months of missed payments to her original student loan company.

“Where is my monthly fee going?” asked Hartley.

She said she tried emailing, faxing and calling Student Loan Relief, but the calls went unanswered.

Turns out, Student Loan Relief was under investigation by the state.

“We saw a lot of front end promises about the ability for them to help consumers wipe out their student loan debt. It just frankly wasn’t true,” said Paul Singer, chief of the consumer protection division for the Texas Attorney General’s Office.

For a living, Hartley is a test-maker for Texas public school systems.

Teachers, government workers and non-profit workers are especially vulnerable to these types of companies.

“They make a good target for these entities because of the programs that really do exist,” said Singer.

Programs such as the PSLF (Public Service Loan Forgiveness Program) offer loan forgiveness for certain public workers. It’s free to enroll.

“I think the most important thing to know is they can’t do anything for you that you can’t do for yourself,” said Reid Tepher, an attorney for the Federal Trade Commission.

The Federal Trade Commission worked with the Texas Attorney General’s Office to sue Student Loan Relief.

“This is something that is a nationwide problem,” said Tepher.

Chapter 2

The lawsuit

The man behind Student Loan Relief, according to the lawsuit, is Jason Spencer.

Court records show the company “forfeited their authority to transact business in Texas from Jan. 29, 2016 through June 8, 2017.”

They kept operating, according to the government lawsuit.

LAWSUIT: Federal Trade Commission and Texas Attorney General's Office sue Student Loan Relief by kvuenews on Scribd

Answer to lawsuit filed against Student Loan Relief by kvuenews on Scribd

Complaints listed in the suit include the allegation that Student Loan Relief “changed the login and password on the account” of customers and “substituted their address.”

“They were changing the addresses of their customers so that the consumers had no idea what was going on in their accounts,” said Singer.

Singer said people such as Hartley never knew the loan was going unpaid.

“Instead of doing the right thing, they continue to collect money,” said Hartley.

Some loans increased by $6,000.

The business' website said they’re “in the process of winding down.” All phone numbers associated with the business were no longer in service when the KVUE Defenders called.

Chapter 3

The nationwide problem

The Federal Trade Commission and 12 state attorneys general sued three dozen companies -- including Texas-based Student Loan Relief -- in October 2017 as a part of what's been called “Operation Game of Loans."

Those agencies aim to recover millions.

“I think we have taken a big step in combating these fraudulent student loan companies," Tepher said. "We have sued an alleged $95 million worth of consumer loss."

Part of the $95 million could go back to victims.

State attorneys general lawsuits against companies by kvuenews on Scribd

Federal Trade Commission sues three dozen companies in "Operation Game of Loans"

Anyone who paid money to any of these 36 companies may be able to get some of it back if the court finds the company responsible.

“If you believe you’ve been defrauded by one of them, you should file a complaint with the FTC. That’s the best way to get your name on the FTCs radar to make sure that you were going to get consumer redress,” said Tepher.

The Texas Attorney General’s office also wants to hear from you.

Singer said the office received hundreds of debt relief complaints in 2017.

“Ultimately, we are going to look to find that money so that we can get it back into the hands of the people that it was taken from,” said Singer.

Chapter 4

How you can protect yourself

Neena Hernandez said she signed up with a company after receiving a text message.

When she read her signed contract, the company tacked to her student loan an additional $950 for “cost of service.”

They extended her payments for years.

“I just want other people to know that this is happening. It will sound too good to be true. They just want to take your money,” said Hernandez.

Hernandez tried canceling her policy within 24 hours. The company would’t confirm the cancellation.

Hernandez put a stop on all payments from her bank to the company immediately.

Chapter 5

Here are some signs to help you identify a scam by a student loan debt relief company:

  • They require you to pay up-front or monthly fees for help. It is illegal to charge an up-front fee for this type of service. So if a company requires a fee before they actually do anything, that’s a huge red flag, especially if they try to get your credit card number or bank account information. In some cases, they may even step in and ask you to pay them directly, promising to pay your servicer each month when your bill comes due. Free assistance is available through your federal loan servicer.
  • They promise immediate and total loan forgiveness or cancellation. No one can promise immediate and total loan forgiveness or cancellation. Most government forgiveness programs require many years of qualifying payments and/or employment in certain fields before your loans can be forgiven. Also, student loan debt relief companies do not have the ability to negotiate with your federal loan servicer for a “special deal” under the federal student loan programs. Payment levels under income-driven payment plans are set by federal law.
  • They ask for your FSA ID. ED or its partners will never ask you for your FSA ID password. Your FSA ID is used to sign legally binding documents electronically. It has the same legal status as a written signature. Do not give your FSA ID password to anyone or allow anyone to create an FSA ID for you. If a company has access to your FSA ID information, they can make changes to your account without your permission.
  • They ask you to sign and submit a third-party authorization form or a power of attorney. These are written agreements giving the third party legal permission to talk directly to your federal loan servicer and make decisions on your behalf. Debt relief companies often want these authorizations so that they can change your account and contact information, so you don’t realize that they aren’t actually paying your monthly student loan bill.
  • They claim that their offer is limited and encourage you to act immediately. Student loan debt relief companies often try to instill a sense of urgency by citing “new laws” or discontinuing programs as a way to encourage borrowers to contact them immediately. While there are some deadlines you need to meet in regard to your student loans — for instance, if you’re paying under an income-driven repayment plan, you need to recertify annually — our programs are limited only by the eligibility requirements.
  • Their communications contain spelling and grammatical errors. While many of the communications sent out by these companies look very formal (for example, fold-and-tear letters with safety patterns), they often contain spelling and grammatical errors. If you notice unusual capitalization, improper grammar or incomplete sentences in the communication you receive, that’s likely a red flag that the company is not affiliated with ED.

Source: U.S. Department of Education

The U.S. Department of Education also has examples of false claims by student loan debt relief companies:

  • “Act immediately to qualify for student loan forgiveness before the program is discontinued.”
  • “You are now eligible to receive benefits from a recent law that has passed regarding federal student loans, including total forgiveness in some circumstances. Federal student loan programs may change. Please call within 30 days of receiving this notice.”
  • “Your student loans may qualify for complete discharge. Enrollments are first come, first served.”
  • “Student alerts: Your student loan is flagged for forgiveness pending verification. Call now!”

“Communications using this type of aggressive advertising to lure borrowers are NOT coming from the U.S. Department of Education (ED) or its partners,” states the U.S. Department of Education on its website.

There is nothing a student loan debt relief company can do that you cannot do for free.

Tap here for information on how to lower or cap your monthly federal student loan payment.

Tap here for information on consolidating your federal loans.

Tap here for information to determine if you’re eligible for loan forgiveness or other programs.

Tap here for information on how to get your loans out of default.

The U.S. Department of Education nor federal loan servicers will never charge fees to help borrowers with their student loans. If a company claims to work with the U.S. Department of Education or claim to be consumer advocates and ask for money up-front, contact the Federal Trade Commission.

Tap here for the Federal Trade Commission.

Tap here for the Texas Attorney General.

If you have a story tip for the KVUE Defenders to investigate, send an email to defenders@kvue.com or call 512-533-2231.

Follow Erica Proffer on Twitter @ericaproffer, Facebook @ericaprofferjournalist, and Instagram @ericaproffer.

Follow Joe Ellis on Twitter @JoeEllisATX.