Federal Trade Commission sends more than $822,000 in refund checks to 14,500 student loan borrowers scammed in debt scam

Federal Trade Commission sends more than $822,000 in refund checks to 14,500 student loan borrowers scammed in debt scam

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The Federal Trade Commission announced this week that it would send thousands of checks totaling more than $822,000 to student loan borrowers who lost money in a debt relief scam.

More than 14,500 consumers who paid money to a company called Student Advocates will receive a check, which the FTC says must be cashed within 90 days of receipt.

The FTC filed a complaint against Student Advocates in September 2019, alleging that the company charged illegal prepayments and lied to borrowers, saying their money would go toward their loans. Customers were also sent to high-interest loans, falsely promising lower payments and, in some cases, debt cancellation.

“The money raised by the defendants has not been paid for consumer student loans,” the FTC said in a statement Thursday.

Student Advocates officials did not respond to a request for comment from CNBC via LinkedIn.

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Red Flags: Upfront Costs, Promises of ‘Immediate’ Results

There are over 44 million student loan borrowers in the US, and the country’s total outstanding loan balance is over $1.7 trillion. The average student loan balance is about $30,000, up from $10,000 in the early 1990s, with many borrowers owing $100,000 or more. Refund issues are common.

For fraudsters, this is an opportunity for scams, consumer advocates say.

Scammers are increasingly promising borrowers cancellation of student loans and lower payments. They often charge up to thousands of dollars upfront for this “service,” which is illegal, consumer advocates say.

“The Credit Repair Organizations Act of 1996 prohibits charging prepayments for credit repair, such as canceling student loans, consolidating student loans, and changing repayment plans,” said higher education expert Mark Kantrowitz.

Never respond to requests to share your federal student ID except from your administrator or the government, Kantrowitz said.

Also, be wary of any promises of “immediate” student debt forgiveness, he added.

“As we all know, forgiving loans isn’t such a quick process,” Kantrowitz said, referring to one of the most popular — and genuine — programs. “Government loan forgiveness lasts 10 years.”

Look for Legitimate Resources for Student Loan Assistance

These scammers often offer services that you could do yourself online in less than half an hour, lawyers say.

For example, if you’re struggling to pay your student loan, you may be able to switch to an income-driven amortization plan with your administrator.

According to the program, your monthly bills are limited to a portion of your earnings. There are also economic hardships and postponement of unemployment. You can request these forms of care free of charge at StudentAid.gov of the Department of Education.

And remember, until at least the end of August, most federal student loan borrowers will no longer be affected by their payments, thanks to the pandemic-era policies in effect since March 2022.

Consumers who receive a check from the FTC and who have questions about their refund should call the refund administrator, JND Legal Administration, at 877-540-0989, the committee said.

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