Student loans made the list for the Top 10 Consumer Scams in Illinois, ranking 7th with 1,500 of the 25,094 complaints that are seen by Attorney General Lisa Madigan's office. As if the 40 million Americans who hold $1.2 trillion in debt wasn't bad enough, student loan scams joined the list of scams including abusive debt collection practices, mortgage lending, and payday loans, according to Gail MarksJarvis.
Most people know that one of the top consumers scams out there is identity theft. What's not as well-known is the large number of students who fall victim to student loan scams. Though they may be promised debt relief by making upfront payments of hundreds of dollars, with no relief to ever come, according to MarksJarvis. The scammers who once defrauded people with mortgage relief scams, according to MarksJarvis, now ventured into new territory: student loans. Madigan has targeted one of the scamming businesses based in Lombard, National Student Loan Rescue, and filed suit against them on Monday. They reportedly "advertised it would get student loans out of default, remove wage garnishments, lower monthly payments and secure loan forgiveness, but didn't deliver after accepting upfront fees."
What happens when government, income-based repayment programs aren't doing enough to help students with their debt? Borrowers turn to alternate options and fall victim to scam artists. Madigan blames the inefficient of such federal loan services for "keeping people in debt" and disabling them from contributing to the economy through purchases such as car-buying. Furthermore, she criticizes the quick relief forbearance which provides temporal relief with added interest charges to be paid later. This only perpetuates the cycle of debt, according to Madigan.
To "relieve" student loans, private companies are actually just filing paperwork to consolidate borrower's federal loans into a Direct Consolidation Loan. That means they're charging more than $1,000 for services that the Department pf Education offers free of charge. Some fraudulent businesses will advertise on the radio, using titles such as "federal" or "national," even though they are private businesses. If they promise to relieve student debt outright or get you out of default, they're most likely scamming you. If it seems too good to be true, it most likely is. For the complete list of top Illinois scam complaints, as well as options for helping borrowers on repayment options, read here.
Word of advice from Madigan: borrowers should never have to pay for information on paying back loans. A way to spot scams is "noting requests for upfront payments." Likewise at Scholarships.com., where we believe that no scholarship search or scholarship should ever cost a penny, as those are only the practices of sharks and scammers when it comes to the business of awarding money, not taking it.