U.S. Senators Tom Udall and Martin Heinrich have called on federal officials to investigate allegations that so-called “debt relief” companies have been using deceptive practices to profit from students seeking assistance in repaying their college loans.
The federal government provides tools to help students manage their college loans free of charge, but a new National Consumer Law Center report revealed that private companies are taking advantage of students by charging them up to $1,600 up front and $20-$50 in monthly fees to participate in these free federal repayment programs.
“Recently, I have heard of misleading ads geared towards New Mexico students and parents from organizations that aim to benefit from those who are not aware of the free borrower assistance programs provided by the federal government,” said Udall. “Our students are amassing record levels of debt in order to achieve their higher education degrees, and we need to do everything we can to ensure that unethical business practices are not taking advantage of the ongoing student debt crisis.”
“It’s disturbing to think that unscrupulous, private companies are trying to profit off student borrowers at a time when they are struggling to pay off their loans and make ends meet,” said Heinrich. “New Mexico students and their parents deserve to be protected from these deceptive and unethical practices.”
In a letter to Secretary of Education Arne Duncan, Federal Trade Commission Chairwoman Edith Ramirez and Consumer Financial Protection Bureau Director Richard Cordray, the senators joined 21 of their colleagues in noting that the report also revealed numerous potential violations of consumer protection laws and found that many for-profit companies falsely claim to be connected with the Department of Education and other government agencies.
Americans currently owe more than $1 trillion in student loans and the overall financial burden from student loan debt is second only to debt from mortgage borrowing. New Mexico has seen an increase in student loan borrowing as tuition rates have risen across the state. Moreover, there have also been reports in New Mexico of untrustworthy advertisements and websites aimed at lowering student loan payments or providing cash assistance.