Student Loan Assistance Companies that Charge High Fees To Do What You Can Do for Free

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Student loan debt has reached historic levels in the United States. The cost of college has increased by over 1,200 percent in the last 40 years. Student loan debt in the United States now tops $1.75 trillion. One in five Americans owe money on student loan debt, and student loan debt is now the second largest form of consumer debt—second only to home mortgage debt. With many recent graduates struggling to find jobs and the amount of student debt rising, the student loan assistance industry—and the opportunity for scams—has grown.

Student loan assistance companies sell services that claim to help borrowers manage and repay their student loans. Companies have flooded internet search engines with promises of reducing, forgiving, or eliminating consumers’ student loan debt.

Don’t be fooled. Student loan assistance companies try to hide the fact that they charge hundreds or thousands of dollars for something borrowers can do for free. The companies often claim to have “inside information” or special relationships with the U.S. Department of Education to dupe borrowers into paying.

Additionally, student loan assistance companies often submit false information about borrowers’ income, family size, and marital status on loan adjustment applications in order to try to artificially qualify consumers for lower monthly payments. This can have severe consequences for borrowers’ loans when the truth comes out. 

It is important for student loan borrowers to be on the lookout for companies that charge hefty fees for one-size-fits-all services that aren’t right for everyone and are available for free from the government. Here’s how it might happen:

“Tracy” signed up for what she thought was a student loan repayment plan sponsored by the U.S. Department of Education. After paying almost $1,000 in fees—money that she was told would count toward her loan payments—she found out that the repayment plan was not affiliated with the government and the fees were not applied to her loans.

“Jeff” contracted with a student debt relief firm to consolidate his loans. After large up-front fees and several $40 monthly payments, Jeff discovered that none of the payments had been applied to his loans and that his loans were now in default.

Red Flags

Student loan assistance scammers may advertise consolidation, deferment, forbearance, or forgiveness programs as one size fits all, surefire fixes for borrowers struggling to manage their student loan debt. It is important to remember that not all repayment plans work for everyone. Choosing the wrong repayment plan can have serious consequences. For example, some deferment and forbearance plans are only appropriate for someone who is permanently disabled and unable to work. If a person who signed up for one of these plans gets a job and earns money down the road, the person may have to pay back thousands of dollars in back payments, fees, and interest. Other repayment plans may lengthen your loan payback period, meaning you’ll pay more in interest. The Attorney General’s Office offers a publication—Student Loan Handbook—with more information on student loans.

Watch out for these red flags:

Minnesota’s Debt Settlement Law

Minnesota’s Debt Settlement Services Act (Minn. Stat. Ch. 332B) requires companies to register with the Minnesota Department of Commerce before providing services to Minnesota consumers, if the companies provide advice, or act or hold themselves out as acting as an intermediary between consumers and their student loan creditors to reduce the amount of their student loan debt.

The Minnesota Department of Commerce maintains a website of debt settlement companies that have registered with the Commerce Department and are authorized to provide debt settlement services to Minnesota residents. You may access the list of debt settlement service providers registered with the Commerce Department by visiting its website at,external link icon clicking on the “License Lookup” link, and selecting “Debt Settlement” from the drop-down list for license type.

If you have questions about a student loan assistance company, you may contact the Commerce Department as follows:

Minnesota Department of Commerce
85 7th Place East, Suite 280
St. Paul, MN 55101
(651) 539-1500 (local)
(800) 657-3602 (Greater MN only) external link icon

How To Get Debt Help

If you need help managing or paying student loan debt, you should contact your loan servicer to learn about repayment plans that are best for you and your loans, or any other options to defer or forgive your student loan debt. You can also visit the U.S. Department of Education Federal Student Aid Office website, at,external link icon to learn more. All forms are free to download and submit.

The following agencies also provide information about repayment plans and how to avoid student loan assistance scams:

Consumer Financial Protection Bureau
1700 G Street NW
Washington, DC 20552
(855) 411-2372

United States Department of Education
Federal Student Aid Ombudsman Group
P.O. Box 1854
Monticello, KY 42633
(877) 557-2575 external link icon

Federal Trade Commission
Bureau of Consumer Protection
600 Pennsylvania Avenue NW
Washington, DC 20580
(877) 382-4357
TTY: (866) 653-4261 external link icon

If you have been contacted by a student loan assistance scammer, you should report the matter to the Minnesota Attorney General’s Office as follows:

Office of Minnesota Attorney General Keith Ellison
445 Minnesota Street, Suite 1400
St. Paul, MN 55101
(651) 296-3353 (Twin Cities Calling Area)
(800) 657-3787 (Outside the Twin Cities)
(800) 627-3529 (Minnesota Relay)

Related Posts:

Student Loan Handbook

The cost of attending college has skyrocketed—over 1,000 percent in 30 years—faster than the rate of inflation. Many students and their families must borrow money to pay for college. This guide is a collection of information for students, graduates, parents, and anyone seeking to take out and repay student loans.

Scholarship and Financial Aid Scams

As college costs continue to rise, students increasingly find themselves searching for scholarships and financial aid. Through high pressure sales seminars and other methods, some unscrupulous companies purport to guarantee or promise scholarships, grants, and other financial aid for a fee, but deliver little or none of the promised assistance.