Student loan debt surged by more than three times than what it was a decade ago and hovering at around $1 trillion.
A record number of students who graduated in recent years when the financial system collapsed, have an average debt burden of more than $20,000.
However, for the debt relief agencies, all these scenario mean a never-ending goldmine of new customers and easy money.
These debt relief companies are reaching out to wretched student loan bearers and making them believe that they too can become debt free just like other so-called satisfied clients of their. A renewed hope of becoming debt free making these people get caught in the traps of these unethical debt relief agencies and forcing them pay hefty upfront fees.
Nowadays, federal and state regulators are spotting instances that debt relief agencies are shifting away from credit card and mortgage debt to student loan debt, and processing them with potentially questionable tactics.
Often these debt relief agencies are promising of lowering the loan amounts to half and moreover, of lowered monthly payments to be debt free.
In a suit filed against these scam entities by Lisa Madigan, the attorney general of Illinois, it has been contended that these businesses lured borrowers into paying hundreds and thousands of dollars upfront, and in a particular case, $49.99 a month afterwards. The suit also included that these companies often misled the debtors about the fees, and in some cases, faked affiliation with federal relief programs.
In a particular statement she said that the most cruel thing is that these companies even charged for assistance debtors could have received for free from the Department of Education.
It's just, unfortunately, the latest scam on the largest group of people who are struggling with the most debt, Lisa said in an interview last week, revealing that her office had been flooded with complaints about shady debt settlement practices.
Even before this particular suit by the attorney general of Illinois, debtors across the nation has lodged hundreds of complaints against debt settlement agencies with the Federal Trade Commission (FTC). As the industry has mushroomed, so did the abusive and spammy tactics. For example, in 2013, the complaints with the FTC reached 204,644, which was up by 10% than what was in 2011.
The allure of the debt settlement companies pose a serious threat and here debtors need to step cautiously, regulators say. Students should know more about the nature of their loans and only rely on trustworthy government offices like the U.S. Department of Education when trying repaying their debts.