While high school seniors might be buried in the college application process this month, come January—when financial aid season begins—it will be time to think about how to pay for it all.
New information out this week underscores the importance of being vigilant about the complicated student loan process, from borrowing to repayment.
On Dec. 11, the federal Consumer Financial Protection Bureau issued an alert warning all student loan borrowers to watch out for scams promising “student debt relief.” The federal agency shut down College Education Services, a student loan debt company based in Tampa, Florida in a joint filing with Florida’s Attorney General. It also filed a lawsuit against Student Loan Processing US, based in Laguna Nigel, Calif., for operating illegal debt relief services.
“We allege that both companies exploited vulnerable student loan borrowers, made false promises about their debt relief services, and charged illegal upfront fees,” according to the bureau alert.
Borrowers do not have to pay someone to help with their student loans, the agency advised consumers in another alert last year. Free assistance is available through student loan servicers.
The CFPB listed four warning signs that a debt relief company may be trying to rip you off:
1. Pressure to pay high up-front fees;
2. Promises of immediate loan forgiveness or debt cancellation;
3. Demands that you sign a “third party authorization";
4. Requests for your Federal Student Aid PIN, allowing access to information about your student loans.
Nearly 40 million Americans now carry student loan debt, and the amount has more than doubled since 2007. To better understand the growth of borrowing to finance college, check out Lumina’s two short documentaries on the history of the student aid program.
As Congress prepares to consider reauthorization of the Higher Education Act first passed in 1965, the videos provide background on the development of policies to help students pay for college. Understanding the evolution of the programs and political forces behind the changes is useful as new strategies and approaches are proposed.
(The Lumina Foundation supports coverage of P-16 alignment in Education Week.)