As the impact of COVID-19 on daily life diminishes, student borrowers whose repayments have been suspended due to the virus may consider their options for resuming payments on this potentially life-changing debt. This may lead some borrowers to consider debt consolidation.
The Better Business Bureau warns borrowers to research these options carefully and not give in to the temptation of looking for a quick fix that could turn out to be a scam.
BBB Scam Tracker received over 400 reports of debt relief and credit repair scams in North America in 2020. These scams cost consumers a reported total of over $246, with the median consumer losing $800. Most often, these reported scams involved payment by bank account debit.
Upfront fees, including fees to enter a repayment plan, are a common thread among debt relief scams. These upfront fees are illegal, and according to the Federal Student Aid division of the US Department of Education, borrowers are never required to pay aid for their student loans.
Some scam companies ask consumers to sign a power of attorney for financial decisions, use it to suspend consumer loans – a way to temporarily stop or reduce payments, during which the loans continue to earn interest – and require the consumer to make payments directly to them rather than to the loan servicer. In effect, the company keeps the payments for itself and the forbearance eventually expires without any repayment progress being made.
Loan repayment assistance – including loan deferrals, forbearance, repayment, and forgiveness or release programs – is available through the Department of Education and loan officers. Registration for these programs is free.
BBB advises borrowers seeking student loan relief to consider the following tips:
• Do your research on the company and the options available to you. BBB business profiles on debt consolidation and other businesses are available at BBB.org or by calling 888-996-3887. These include customer complaints and how they were handled, customer reviews, and an A+ to F grade.
• Do not pay upfront fees to debt repayment companies. If a rescue company asks for money before helping you, report it to BBB.
• Think twice before signing a power of attorney or giving a company your bank account information or your Federal Student Aid website login information. These actions allow a company to make financial decisions for you.
• Don’t agree to a long-term abstention or adjournment plan without doing your homework. These should only be seen as temporary solutions.
• Don’t be fooled by promises of quick relief. The loan relief and forgiveness options available through the Department of Education still require years of payments, and these loans cannot be canceled by bankruptcy.
For help, visit BBB.org or call 888-996-3887.
Michelle Gleba is the Mid-Missouri Regional Director for the Better Business Bureau.