NerdWallet, a financial website that helps people understand their economic options, has identified 131 companies and owners who claim to reduce or eliminate student loans. Instead, these companies have been cited for fraudulent or questionable practices.
Officials at the website said they released their Watch List report to assist those who are seeking help to diminish their student debt. The list provides the names of companies that have been investigated, penalized or sued by federal or state authorities.
“Our main goal is to help shine a light on this process,” said Brianna McGurran, a student loan expert with NerdWallet.
McGurran said the list was created for borrowers to have a simpler way to navigate the process of student debt relief. She also said the Watch List will help debtors avoid costly mistakes.
NerdWallet combed through federal and state public and court records. Their team also contacted officials in all 50 states, including state attorneys general to compile the necessary information to create this resource for borrowers.
“The team has mined public records of hundreds of companies profiting from the student loans and the 44 million people shouldering $1.5 trillion in outstanding student loan debt,” said McGurran.
She noted other factors that can land a company on The Watch List include: owners failing to control debt, companies with substantial unpaid tax liens and companies that received a “D” or “F” rating from the Better Business Bureau.
Many of the enterprises on The Watch List had businesses under more than one alias. Because of this, only seven of the 130+ companies have had federal action taken against them, but 14 were shut down. Thirty-four companies had state governmental action taken against them, resulting in a total number of 48 named businesses. Several others are currently engaged in private lawsuits over their business practices.
McGurran said consumers should learn who acts as their servicing company and contact them first concerning a payment plan that is better suited for their household. She also said that consumers should avoid companies that charge upfront fees, a percentage of income, or a monthly payment.
She added that companies with questionable practices typically will send out red flags that consumers can use to help them identify potential problems, adding that genuine student debt relief helpers will not ask potential consumers detailed personal questions such as their social security number prior to establishing a formal business relationship.
“It’s all about doing the research and protecting yourself,” said McGurran.
In a 2016 study, NerdWallet found on average that students paid $600 to debt relief businesses for free services that already were available to them from federal agencies.
To help future consumers, NerdWallet advises those who have been victimized to file a complaint with agencies through their state attorney general’s office, the Federal Trade Commission, or the Consumer Federal Protection Bureau. They said websites such as Studentloans.gov or Studentaid.ed.gov are also available to aid borrowers looking to research plans for themselves.
“We have a lot of hope this will clarify a confusing industry,” said McGurran.