A number of government agencies, including the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission, and the Department of Education, have expressed concerns about student loan debt relief practices.
- Beware of promises of immediate loan forgiveness or debt cancelation. Student loan debt relief companies or law firms do not have the ability to negotiate a “special deal” with Sallie Mae.
- They may tell you to stop making loan payments to your student loan servicer, but that may result in delinquency, default, or negative marks on your credit report.
The CFPB warns that a student loan debt relief company may be trying to take advantage of you if they:
- Pressure you to pay high up-front fees.
If a debt relief company requires you to pay a fee immediately or tries to make you sign a contract on the spot, it may be a scam. Avoid companies that require payment before they actually do anything, especially if they try to get your credit card number or bank account information. Not only does your student loan servicer offer free assistance, taking payment for debt relief services before providing help is often illegal.
- Demand that you sign a “third party authorization.”
You should be cautious if a company asks you to sign a “third party authorization” or a “power of attorney.” These are written agreements giving them legal permission to talk directly to your student loan servicer and make decisions on your behalf. In some cases, these companies may even step in and ask you to pay them directly, promising to pay your servicer each month when your bill comes due.