The nation’s student debt load now exceeds $1.2 trillion and scammers have taken notice.
Vermonters have seen a rise in calls, emails and late-night advertisements offering lower payments or other adjustments on their federal student loans.
“Don’t do it,” Rep. Peter Welch, Attorney General Bill Sorrell and VSAC President Scott Giles said Friday.
The three were joined by Kate Ash of Sen. Patrick Leahy’s staff in warning consumers about what Welch referred to as “rip-off artists” who charge hefty fees for services that students struggling to repay their loans could receive free.
Giles said the Vermont Student Assistance Corp. (VSAC) has received several complaints from Vermont students who were contacted by, or have contracted with, more than a dozen companies offering to consolidate or adjust their federal student loans. Giles said the companies charge from $600 to as much as $1,400 in fees for special repayment deals the companies say cannot be obtained without their help. These vendors can be deceptive and often give consumers the impression that they are connected with federal student loan programs, officials said.
“They are approaching folks who have student loans saying that for a fee they will find you a loan forgiveness program or a reduced payment program that would not otherwise be available without their services,” Giles said.
The group encouraged anyone who has questions about a student loan to contact VSAC, the attorney general’s consumer assistance program at 800-649-2424, the federal Education Agency or the federal Consumer Financial Protection Bureau.
Sorrell said students don’t need to pay for loan restructuring and that many of the companies offering these services are in violation of Vermont law.
“Most, if not all of the services that these debt adjustment companies offer are available free,” he said, either through VSAC or by contacting the loan servicers directly.
Sorrell said most of the companies are not registered to do business in Vermont and consumers are protected under state law. He said his department will pursue the student loan modifiers in the same way it prosecuted illegal pay-day lenders that charged interest of up to 1,000 percent.
Sorrell said it is illegal for lenders to ask for up-front payment, consumers have three days to rescind a contract and can back out of a contract at any time without incurring a penalty.
The best way to avoid being scammed is not to believe “too good to be true” offers.
“There will always be people trying to rip off students and no matter what laws we pass there’s going to be folks out there that see this trillion-dollar market as their opportunity to steal money,” he said.
Calls to two of the loan adjustment companies on a list of 15 released by VSAC were not returned Friday.