New Report Documents Abuses by Businesses “Helping” Those With Student Loan Debt

StudentLoans_iStockThe National Consumer Law Center (NCLC) recently issued a report on the practices of a new industry: student loan debt relief services. According to the report, these businesses, which purport to assist those struggling with student loan debt, often engage in deceptive advertising and claims, charge high fees, and give consumers bad information.

What Are Student Loan Debt Relief Services?

With national student loan debt now larger than credit card debt, it’s no surprise that businesses are popping up nationwide with the promise of assisting those Americans struggling under a mound of student loan debt. These services say they will help students get relief under government repayment programs.

The NCLC Study 

The Student Loan Borrower Assistance Program, a project of the NCLC, conducted a study of these ever-increasing businesses. NCLC conducted a “secret shopper” investigation in which an NCLC employee called ten student loan debt relief agencies with a set “story” of her student loan problem.  The report’s authors also reviewed the websites of these ten companies, and ten additional companies.

The results were not that surprising, given the track record of other types of debt relief services over the past few decades. The report documented problems with student loan debt relief these services that are similar to problems with credit repair agencies, debt settlement companies, and others. For some of these other industries, laws have been passed to regulate the services and consumer advocates have warned consumers to beware.

Problems With Student Loan Debt Relief Services 

According to the NCLC report, individuals and businesses that advertise  their ability to assist consumers with student loans often do the following:

  • Fail to inform borrowers about all of their options. The report found that some services recommended loan consolidation to all consumers. Loan consolidation is just one of the remedies available to consumers struggling with student loan debt. It’s not available for all types of student loans, and it’s not always the best option for consumers.
  • Charge high fees. The report found that most student loan debt relief services charge high fees for their services. The programs available to consumers are provided by the federal government. Information and applications are readily available on the Department of Education’s website at (To learn more about these programs, visit Nolo’s Student Loan Debt topic area.)
  • Use a one-size-fits-all approach. Many businesses claim to provide counseling and assistance tailored to the individual student loan borrower. Yet, the study found that often the recommendation was the same for everyone, regardless of their situation.
  • Make false claims about government affiliation. The study found that many student loan debt relief services claimed they were affiliated with a government agency, or portrayed the government repayment programs as their own.
  • Provide incorrect information. Some of the counselors provided incorrect information to consumers about bankruptcy and repayment options.
  • Use sales representatives, not counselors. In addition, the report found that many of these companies claim to provide expert “counselors” with years of experience, when the companies’ websites advertise positions in “sales” not “counseling.” This calls into question whether claims of expertise are accurate.

Your Best Defense: Arm Yourself With Information

The NCLC report makes various recommendations to alleviate the problem of this new industry, including capping fees, requiring disclosures, and regulating these businesses. However, as a consumer, your best defense against getting taken by these debt relief services is to arm yourself with information.

You can get excellent information about the various repayment and cancellation programs available to you on the Department of Education’s website at www.studentaid.ed and on the NCLC website devoted to student loans at After learning about your options, you may decide you’d like assistance in completing and submitting and application. If so, consider talking to an attorney, a consumer credit counselor (see Choosing a Credit Counseling Agency).  If you are considering a student loan debt relief company, be sure to go in with your eyes open.  (To learn about debt relief services to watch out for, see the “What to Avoid” section of Nolo’s Debt Settlement topic page.)

Get the Report

To read the whole report, see Searching for Relief: Desperate Borrowers and the Growing Student Loan “Debt Relief” Industry.