346 students attending Washington State have been overcharged fees between 6 loan debt adjusters based outside of the state. These fees total in a whopping $162,000. Student loan debt adjusting companies are intended to aid borrowers with paying back their student loans, but these firms have dug their clients into a deeper hole with their student loan debt.
Attorney General Bob Ferguson has been assigned this case to help the students reclaim their refunds. According to Ferguson, the students will receive their refunds in July 2016. “Students graduate from Washington colleges with an average of nearly $25,000 in debt,” Ferguson said. “These firms preyed on students who sought their help.” The firms have been charged with overcharging students an “upfront fee” for services over 4 to 27 times the legal limit. These firms have also charged over the 15% amount of the borrower’s payment plan, also over the legal limit. The third charge against these firms is that they have been conducting business malpractice. The firms poorly inform and advertise what their services entail in order to trick the borrowers into paying more than what was advertised.
The purpose of these debt adjusters is to act as a guide for students to consolidate their student loans. By working as the “middle man” between the student and the Department of Education, debt adjusters have served as a useful tool for students with debt. However, for these students, that has not been the case.
The six firms that have been charged with overcharging students are:
It is no secret that student loan debt has become a nationwide crisis in the United States. Student debt has now become the second largest consumer debt right behind home mortgages being at the top of the list. Student loan debt has accumulated to over $1.2 trillion as of 2015. 40 million Americans now owe student loans, with a large fraction having these loans placed in default.
In the state of Washington alone, about 800,000 residents have federal student loan debt. This translates into over $21 billion owed statewide. Compared to the national average of student loan debt of $35,000, Washington college students graduate with an average of $25,000.
This issue has begged the question: Why are these firms overcharging students if they are intended to help them?
In short, the answer is simple: these firms are taking advantage of college students. Young and financially unstable students are a target amongst these agencies, who take advantage of the tight situation that these borrowers are in to make more money off of their debts.
So then what can be done to prevent students from being overcharged?
Creating legislation that will hold firms to their standards of helping their clients is a great start to preventing students from being overcharged.
Another solution to seek is to apply for the U.S. Department of Education federal repayment programs. This process is free and is typically accomplished within 6 weeks. They are many different types of programs offered to aid borrowers pay back their student loans to avoid being placed into default. There are even programs offered that base monthly payments on a percentage of the borrower’s income. More information about these programs is available here.
There are free services available to borrowers through the U.S. Department of Education’s Loan Consolidation Information Call Center. The borrower just needs to call 800-557-7392 to receive free information about the process of consolidating federal student loans and whether or not that is the most viable option available to them.
Options are available to help
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