As the impact of COVID-19 on daily life diminishes, student loan borrowers whose repayments have been suspended due to the virus may consider their options to resume payments on this potentially life-altering debt. This may lead some borrowers to turn to debt consolidation.
Better Business Bureau cautions borrowers to research these options carefully and not to give in to the temptation to look 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 out. $ 800. Most often, these reported scams involved payments by debit from bank account.
Upfront fees, including the fee to get into 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 United States Department of Education, borrowers are never required to pay for help with their student loans.
Some scam companies require consumers to sign a power of attorney for financial decisions, use it to put consumer loans on hold – a way to temporarily stop or reduce payments, during which loans continue to accumulate interest – and ask the consumer to make payments. directly to them rather than to the loan officer. In effect, the company keeps the payments to itself, and the forbearance eventually expires with no repayment progress being made.
Loan repayment assistance – including loan deferral, forbearance, repayment, and forgiveness or discharge 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 Company Profiles on Debt Consolidation and Other Companies are available at BBB.org or by calling 888-996-3887. These include customer complaints and how they were handled, customer reviews, and a rating from A + to F.
• Do not pay upfront fees to debt service companies. If a rescue company asks you for money before helping you, report it to BBB.
• Think twice before signing a power of attorney or giving a business your bank details or Federal Student Aid website login information. These actions allow a business to make financial decisions for you.
• Don’t agree to a long-term forbearance or deferment 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 always require years of payments, and these loans cannot be discharged through bankruptcy.
For help, visit BBB.org or call 888-996-3887.
Michelle Gleba is the Mid-Missouri regional director for the Better Business Bureau.