WASHINGTON – U.S. Senators Ben and Cardin Barbara A. Mikulski (both D-Md.) today joined with 21 of their Senate colleagues to call 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.
“We are deeply concerned by the report’s findings, which indicate that some private companies are mischaracterizing federal student loan repayment programs as their own and charging exorbitant fees to enroll people in free government programs,” the Senators wrote in a letter to Secretary of Education Arne Duncan, Federal Trade Commission Chairwoman Edith Ramirez and Consumer Financial Protection Bureau Director Richard Cordray.
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.
“Existing law should be enforced, and new rules should be considered where appropriate,” the Senators wrote. “We owe it to student loan borrowers—and to taxpayers—to ensure that unscrupulous businesses are not taking advantage of the student debt crisis.”
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.