Largely via social media.
Debt relief firms that have been sued for advertising wildly expensive, misleading student loan services have begun to explicitly target students of for-profit colleges on social media.
Pages with names like “Student Loan Forgiveness Support,” which have amassed tens of thousands of likes on Facebook, are using recent news about closures and lawsuits against for-profit colleges to lure those students into so-called “debt forgiveness” services, which essentially entail paying as much as $ 1,000 to fill out a free loan rehabilitation form provided by the Education Department.
As a result, thousands of poor students who have already been victimized by for-profit colleges could end up paying hundreds of dollars to yet another predatory company. The targeting of students at for-profits is a new twist on an exploitative scheme that is only just beginning to draw national attention. As scrutiny of for-profit colleges grows and several more face possible closure or legal action, it will likely only intensify.
The student loan relief scheme treads familiar territory. In 2008, in the wake of the housing crisis, mortgage scams flourished, including those that lured borrowers into paying thousands of dollars in upfront fees to fill out loan modification forms.
When it comes to student loans, the scheme works like this: Advertisements tell people that they are eligible for federal student loan forgiveness and encourage them to call a phone number for more information. Once they call, salespeople offer to enroll debtors in a federal program, usually one that offers income-based repayment or loan consolidation, handling paperwork and promising they will “negotiate” with the government on debtors' behalf to get a maximum amount.
Firms defend their work by comparing their services to tax preparation. But the forms required by the Education Department are much more straightforward than complicated tax forms, and are readily available and downloadable from the Department's website. The process is exceedingly simple, with no negotiation required: If you fill out a form and your income qualifies you for the repayment plan, you'll be enrolled in it.
The fees charged for those services are often exorbitant: A lawsuit filed by the Illinois Attorney General this summer against two student loan debt settlement firms alleged that they charged illegal upfront fees of $ 700 to $ 1,200, and sometimes tacked on monthly payments of $ 49 for no apparent reason.
The Illinois lawsuits chronicle scores of deceptive practices by debt settlement firms, including promising “debt forgiveness” when the only services they provide are consolidation and different payment plans, claiming that they are affiliated with the federal government, and implying to debtors that they are not able to fill out the forms on their own. Many also claim the existence of a nonexistent “Obama Debt Forgiveness Program” through which students' loans can be erased.
Historically, debt settlement firms “aim at everybody,” said Deanne Loonin, an attorney for the National Consumer Law Center who authored a report on the schemes last year: Graduate student or graduate of Everest College, if you have student loan debt, you may find yourself barraged by emails and advertisements offering “debt forgiveness help.”
But in the wake of news about the closure of Everest College and government lawsuits that could entail debt relief on students' private loans, Facebook pages have sprung up that appear to be devoted entirely to luring for-profit college students. One such page, “Student Loan Forgiveness,” has racked up more than 10,000 likes since it began just two months ago. It regularly posts articles about lawsuits against Everest and ITT that say, “If you are a FORMER STUDENT and HAVE STUDENT LOANS…There are circumstances in which you can have your federal student loans forgiven.”