This blog post by my friend Joshua Cohen is so good, I just asked him if I could steal the whole thing. He said yes, as long as I give him credit. Which I am doing.
I took a phone call today from a “student loan assistance company” on my personal phone.
As the Student Loan Lawyer, I was intrigued. Perhaps the gentleman on the other end of the line had valuable information. After all, companies such as his are making a splash with student loan borrowers these days.
After just a few minutes, my suspicions were confirmed. What I heard was ridiculous, misleading and filled with such bad information that I’m sending a letter to my Congressmen asking for an investigation into these scamsters.
It started out well enough. He said his company, based in South Florida but calling me from a Connecticut number, would help me lower my Federal student loan payment and see if I qualify for forgiveness.
I know where this is going, I thought to myself. So I asked if he was talking about putting me into Income Based Repayment with a long-term goal of Public Service Loan Forgiveness. He said he had more to offer me, at which point I became very interested in his pitch.
I told him that my federal loans are being serviced by Vermont Student Assistance Corporation, which I know is a guarantee agency and note holder for my FFEL loans. He attempts to correct me by saying that VSAC is a collection company for the U.S. Department of Education, which is the holder of my student loan promissory note.
I know he’s wrong, but I let it go.
Then comes the big lie.
The salesman tells me that the Income Based Repayment program offered by my loan servicer is an internal program, not a Federal payment plan. The servicers, he says, offer their own internal version of Income Based Repayment that won’t qualify for forgiveness in 25 years.
The promise he makes is that his company will ensure that I am enrolled in the Federal program, not the one offered by my federal student loan servicer.
This, I assure you, is nonsense.
Federal student loan servicers are under contract with the U.S. Department of Education and are required to offer the federal repayment plans. A failure to do so would be revealed during a routine audit performed by either the U.S. Department of Education or the U.S. Government Accountability Office.
Servicers may do shoddy work from time to time, but this has never been uncovered in all the time the government has been auditing loan servicers.
The salesman, however, wants me to believe that his organization can do something more than what’s usually done. Their selling proposition is that they will make sure that I’m on a federal payment plan rather than some fictional “internal servicer” plan.
It’s the lie he needs to sell me. It didn’t work. I hung up on him.
As fair warning, here are 6 lies you’ll hear from the student loan assistance companies:
- You MUST consolidate to get on the income driven plans. NOT TRUE: FFEL loans qualify for IBR. If your loans are all Direct Loans, you can have PAYE and REPAY without consolidating
- You MUST work with us to make sure you’re on the right payment plan. NOT TRUE: You want to check and double check the available plans, but you can do this for FREE through your servicer. This is actually their JOB! Make them do it.
- You can qualify for PSLF if you work with us. LIE: You can qualify for PSLF if you work for a government or 501(c)(3), your loans are Direct Loans, and you’re on the right kind of payment plan. If you’re missing any of those, you can’t qualify.
- We can lower your interest rate. LIE: There is no way to lower your Federal Loan interest rate. Interest is set by Congress, there is no shopping around. If you consolidate, you get a weighted average of the loans you consolidate.
- We can qualify you for the Obama Forgiveness Plan. LIE: THERE IS NO SUCH THING!!!
- We work with or for the Department of Education. LIE: No they don’t!
There are times when you might need or want assistance with your federal student loans, but it’s never a good idea to hire and pay a scamster assistance company.
Talk to your servicer first. If you want a second opinion from a knowledgeable professional, contact a student loan lawyer.
A reputable attorney will review your situation to determine whether there’s a problem. We’re regulated by our state bar, whereas student loan assistance companies aren’t subject to any regulation or oversight whatsoever.
If you think you’ve been the victim of a scamster, contact the CFPB, your State Attorney General, and a student loan lawyer who can help fix your issue.