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Getting it Paid Back: Student Loan Servicing and Student Loan Debt Relief Scams

Learn about student loan servicing practices, income-driven repayment plans, regulatory responses, and the prevalence of debt relief scams targeting distressed borrowers. Stay informed and protect yourself from fraudulent schemes.

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Getting it Paid Back: Student Loan Servicing and Student Loan Debt Relief Scams

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  1. Getting it Paid Back:Student Loan Servicing and Student Loan Debt Relief Scams Carolyn FastSpecial CounselNew York State Attorney General’s OfficeBureau of Consumer Frauds & Protection

  2. Student Loan Servicing • Areas of concern: • Servicer practices that may discourage distressed borrowers from enrolling in income-driven repayment programs; • Inadequate customer service; • Practices related to allocation of payments; and • Errors and delays in processing paperwork.

  3. Income-Driven Repayment Plans • “IDRPs”: • Limit monthly payments to 10 to 15% of discretionary income. • Can help distressed borrowers avoid delinquency or default. • Approximately 25% of all student loan borrowers are delinquent or in default. • Borrowers enrolled in IDRPs have lower rates of delinquency. • Many distressed borrowers who are eligible for IDRPs are not enrolled.

  4. Why aren’t more eligible distressed borrowers enrolling in Income-Driven Repayment Plans? • Complexity • Servicer practices • Incentives may not be fully aligned • Inaccurate information and instructions • Delays in processing enrollment/recertification paperwork.

  5. Regulatory Responses • The CFPB, the Depart. of Ed, and the U.S. Treasury working jointly on industry-wide reforms, including: • Standardizing communications • Creating a single online repayment portal • Developing a “Payback Playbook” • Developing new rules concerning how student loan debt appears on credit reports • Enforcement actions.

  6. Student Loan Debt Relief Scams

  7. Student Loan Debt Relief Scams • Scam companies: • Target distressed borrowers with offers to lower monthly payments or eliminate student loan debt. • Often fail to provide the promised services. • Complete a service that can be done for free. • Fail to disclose fees. • Charge illegal upfront fees. • Make misrepresentations about their relationship with government agencies.

  8. Enforcement Actions • CFPB actions • State actions, including: • Florida Attorney General Pam Bondi • Illinois Attorney General Lisa Madigan • Minnesota Attorney General Lori Swanson • Massachusetts Attorney General Maura Healey • New York State Department of Financial Services • Washington Attorney General Bob Ferguson

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