Advertisements on social media websites enticing college students with loan forgiveness services are more than likely a scam, say higher education and consumer protection officials.
In fact, most companies that aren't official student loan servicers con borrowers with fee-based assistance they can get for free through the federal government's financial aid office.
"Any service these websites can offer, you can get for free," said Brian Weingart, financial aid director for the West Virginia Higher Education Policy Commission. "You just need to call your loan servicer and ask about your benefits."
The country's nearly $1 trillion in outstanding student loans make up the nation's second largest consumer debt market. With 8 million federal and private student loan holders in default and many millions more struggling to repay their balances, many companies are preying on distressed borrowers seeking relief.
"Companies offering special services do not have the ability to negotiate with creditors in order to obtain a special deal under the federal student loan program," said Moira Vahey, a spokeswoman for the Consumer Financial Protection Bureau.
According to U.S. Department of Education data, West Virginia has the second-highest federal student loan default rate in the country, at 18.2 percent. A loan is considered in default when the borrower fails to make a payment as scheduled.
Debt relief companies offering loan forgiveness assistance trick borrowers into paying hundreds of dollars in upfront fees by promising their service can save thousands. They then enroll the borrower in a payment plan available for free to anyone with a federal student loan.
Weingart said being asked to pay for the service indicates it's a scam.
"There are legitimate loan forgiveness options out there," he said, adding that the federal government has income-based and other repayment plans.
According to the Consumer Financial Protection Bureau, other warning signs a debt relief company is phony are promises of immediate loan forgiveness or debt cancellation, demands for power of attorney and request for personal federal student aid PIN numbers.
Recently, companies that offer loan refinancing services for a fee have taken to websites like Facebook where they circulate personalized ads that are likely using school information posted on user profiles.
"Many University of Charleston students are qualifying for student loan forgiveness," one ad says.
The ad is linked to a website that claims loan forgiveness is three simple steps away. Callers to the advertised number are connected with an operator who asks for contact information so they can send links to a student assistance portal that requires input of additional information.
In fine print, the website acknowledges its services are fee-based and that loan relief programs are available for free from the U.S. Department of Education.
The Higher Education Policy Commission educates students about loan options when it counsels them through the Free Application for Federal Student Aid. Weingart said the best advice he can give to a student having trouble paying back a loan is to contact their loan servicer.
"And our office is always happy to be a resource," he added.
In June, the Consumer Financial Protection Bureau asked Facebook and Internet search engines to help stop student loan scams by watching for suspicious ads.
Reach Samuel Speciale at
sam.speciale@wvgazettemail.com,
304-348-7939 or follow
@samueljspeciale on Twitter.