CNN reports that the average student loan debt in the United States at the end of last year was nearly $30,000. In New York the numbers are almost as bad; the average is just over $25,000. Between 2008 and 2012, student loan debt rose a shocking six percent per year. Seventy percent of college seniors nationwide graduate with student loan debt, and 20 percent of that debt is owed to high-cost private lenders. So it makes sense that young people are drowning and looking for a life-line to escape from their sea of debt. Licensed attorneys can sometimes help. Unfortunately, though, at least some non-attorneys who are claiming to throw out a life preserver are actually sharks.
The New York Times reports that the student loan debt settlement industry is filled with such sharks. These companies offer to help borrowers lower their monthly payments for a large up-front fee. Traditionally this tactic was used to go after desperate borrowers with a credit card and mortgage debt, but young people with crushing student debt provide a new set of victims for these companies. This is particularly true since over half of recent graduates are unemployed or have low-paying jobs that do not even require the expensive college degree the young person is trying to pay off.
Illinois Attorney General Takes Action
One state, Illinois, is taking action to try to prevent these practices. Illinois Attorney General Lisa Madigan is suing two such companies, Broadsword Student Advantage, and First American Tax Defense. The lawsuit claims that these two companies tricked vulnerable borrowers into paying for help that they never received. The young borrowers paid hundreds of dollars upfront for services. Broadsword customers also paid just under fifty dollars a month for Broadsword’s so-called services. The suit alleges the companies misled the borrowers about these fees, and that the companies sometimes faked being associated with federal debt relief programs. Perhaps worst of all, the companies particularly targeted police officers, firefighters, and nurses for their services.
The Problem is Not Unique to Illinois
While Illinois is the only state to take action so far, it is not the only state with this problem. Nationwide borrowers have filed hundreds of thousands of complaints with the Federal Trade Commission about these companies. And the rate of complaints is growing. Given the number of colleges and recent college graduates in New York, hopefully action will be taken in our state to prevent these practices.
What this means for borrowers who are in over their head is that these companies should not be trusted. There are some federal programs in place that can help you with student loan issues. To find out about those programs you should contact the U.S. Department of Education. If your debt issues include more than just student loans, and bankruptcy is a possibility, you should contact an attorney at the Law Offices of Stephen B. Kass, P.C. to understand what options you have in your situation.