SAN DIEGO — Consumers are faced with uncertainties as they manage student debt during the pandemic, according to a press release. Many have experienced the loss or reduction of wages, delayed unemployment benefits, and impending due dates for important necessities like rent, utilities, and life essentials. As debt piles up and consumers search for relief, Better Business Bureau Serving the Pacific Southwest (BBB) warns to use caution when choosing student loan consolidation services.
In the last six months, BBB’s Scam Tracker has reported 131 scams on student loan consolidation services and 157 complaints against student loan services in Greater Arizona and Southern California. The average loss ranges from $300-$440, while some victims lost nearly $3,000. Complainants allege that these companies start with a letter or call to initiate program services, followed by a request for upfront fees. However, after being charged between $200-$800, the companies do not follow through with the consolidation of their federally-held loans. Consumers are later informed by the US Department of Education (ED) that these companies have no affiliation with ED or ED’s Federal Loan Servicers.
BBB advises consumers to be cautious when looking to consolidate student loans:
- Do your research. Before deciding on a company, visit bbb.org to view the company’s Business Review before providing any payment or personal information and contact ED to verify affiliation. Visit the Federal Trade Commission on warnings against current student loan scams.
- Understand the fine print. Be familiar with the fees, terms, and conditions that the company has to offer. Make sure the consolidation company doesn’t move the loan to a private student loan with terms that could be more burdensome than the original loan or charge monthly fees.
- Choose a trustworthy source. Federal student loans can be consolidated through the Federal Direct Consolidation Program at no cost by completing the application process in less than 30 minutes. Private loans must be consolidated with a private lender, so make sure you understand the conditions before you move forward.
The CARES Act extended its suspension on principal and interest payments on federally-held student loans by the US Department of Education through December 31.
Report scams to BBB Scam Tracker.