[O]fficials warn that debt relief companies are finding questionable new ways to make money off student borrowers just as the Vermont attorney general has settled with one operation under an earlier enforcement action.
In the past, scammers offered to consolidate student loans for a monthly fee, officials say. Now some operations are charging to file debt relief applications with the Department of Education that borrowers can submit for free on their own.
After graduating college, Vermonters carry an average student debt of nearly $30,000, according to Giles.
Two years ago, VSAC identified more than a dozen student debt relief companies that it said were tricking borrowers into paying fees, sometimes in the thousands of dollars, for debt relief that they could get for free from the government.
Attorney General William Sorrell’s office settled last month with one of the names on VSAC’s list: United Advisors Group.
The company, based in Irvine, California, was working in Vermont without the proper licensing or bonds, Sorrell’s office said in a news release. It charged Vermonters fees to consolidate student loans and then, without the customer’s knowledge, put them into a debt deferral program and collected payments while the debt grew, according to the release.
UAG agreed to stop working in Vermont and will refund $5,000 to Vermonters who paid for its services. The company also will pay a $6,500 fine, according to Sorrell’s office.
About a dozen Vermonters were taken in by UAG, according to Ryan Kriger, assistant attorney general. Kriger could not comment on whether Vermont is going after more companies on the VSAC list.
VSAC says it became aware of scams while servicing loans for the U.S. Department of Education. Some of the clients who contacted VSAC counselors wouldn’t confirm that they were the actual borrowers. VSAC reached out to the borrowers and found they were paying a group for free services. Borrowers had also given personal information and granted powers of attorney to scammers, Giles said.
VSAC alerted the Education Department and the Consumer Financial Protection Bureau. The Vermont congressional delegation then joined VSAC in a campaign to educate borrowers.
“For awhile folks went underground, but over the last four or five months something has changed and they have re-emerged,” said Giles. He said borrowers are calling him to verify the legitimacy of companies that are reaching out to them making offers to help with their loans. He said even he has received such offers at his work email address.
“We know other Vermonters are being pursued,” Giles said.
About 42 million borrowers have amassed $1.3 trillion in student debt in this country, which has created a $140 billion-a-year industry, according to Consumer Reports. Since 2010, the government has been loaning money directly to students for college. The federal government holds 93 percent of the $1.3 trillion debt.
A number of federal plans give borrowers more time to pay off their loans.
Companies may make these repayment plans sound as if they are their products. In fact, borrowers can apply directly to the Department of Education for these options with a 20-question application that can be done online.
“They are offering an enormous amount of money as a product fee for something that people can do themselves,” Kriger said of certain companies.
That’s not illegal, but the law does not allow companies to do business in Vermont without registering and paying a bond.
A VTDigger reporter, as a member of the public, called some of the companies on the VSAC list to ask about their services.
A representative at one said they “work through the Department of Education.” When asked whether borrowers could go directly to DOE, she said, “You can, but there is a long, drawn-out paperwork process, and if there is anything wrong at all with it you will be rejected.” She also said borrowers can apply only once every six months.
Neither claim is true, according to Giles at VSAC.
The company representative, when asked what she meant about working “through the Department of Education,” replied, “We don’t work directly under the Department of Education. What we do is we work through them. We are the student loan financial folks for them. We do all the paperwork for you and we send it to the Department of Education … like H&R Block.”
Kriger said his office has heard the H&R Block comparison before. “What they do — getting student loan debt consolidations — is not complicated like taxes. In fact, VSAC does this for people for free,” he said.
Another group trying to make money off a free government service has created a series of videos that can be purchased online. The description of one says it will “coach you through the process of submitting your personal information into the electronic IBR application, authorize a transfer of tax information using the IRS Data Retrieval Tool and Review, electronically sign and submit the completed form online.” It costs nearly $400.
Giles described some companies’ practices as slimy. “They aren’t licensed in Vermont, they have violated Vermont’s business laws, in some instances they represent themselves as agents of the federal government. This is a massive fraud,” he said.
