Second only to mortgage debt, student loan debt is the second highest consumer debt category, and it’s even higher than both credit card debt and car loans according to Forbes.com. About 44 million borrowers collectively owe more than $1.52 trillion in student debt in the United States across all demographics and age groups.
The Federal Trade Commission (FTC) reports that they have halted a deceptive student debt relief scheme, which bilked consumers of millions of dollars through false promises that they would be able to reduce monthly payments and eliminate or reduce their student loan debt according to a media release. A federal court has halted the student loan scheme and frozen the assets.
The scammers falsely promoted that they had a 96% success ratio in reducing consumers’ loan payments, while the consumers who purchased the services lost money and did not receive any debt relief. They charged a $499 upfront fee. Director of the FTC’s Bureau of Consumer Protection, Andrew Smith, said “People struggling to repay their student loan debt are a favorite target for fraudsters.” The fraudsters were banned from advertising, marketing or promoting debt relief services, or misrepresenting any facts material to consumers relating to any product or service. One of the principals of the scheme was required to pay $1.7 million in restitution.
There is a new story in Slate magazine, which covers four options for managing student loan forgiveness options for consumers who are looking for ways to get out from under their portion of the crippling burden of student loan debt:
- Borrowers who were cheated by shady, for-profit schools can get their loans forgiven.
An article in the New York Times reports on the enactment of a long-delayed federal rule, which became effective in October. The rule intended to protect student loan borrowers defrauded by for-profit schools. The new rule allows forgiveness of federal student loans for borrowers who were cheated by schools that lied about their job placement rates or otherwise violated consumer protection laws.
- Make sure the student loan forgiveness programs we already have work
The Slate article references the Public Service Loan Forgiveness (PSLF) program, which cancels a borrower’s debt if they work in the nonprofit or government sector for a decade. There is the Revised Pay as You Earn, or REPAYE program, which caps what a borrower owes each month at 10% of their discretionary income, and they are eligible for forgiveness after 20 years.
- Forgive $20,000 for every student’s debt
With this option, a flat amount of loan debt could be forgiven for every borrower, which would help the most troubled population of borrowers without giving upper-class professionals an unneeded windfall.
- Forgive college debt but not grad school debt
The author poses that cancelling undergraduate debt might be an effective way to ease the economic burden of education debt without wasting public funds on budding one-percenters.
The Federal Trade Commission’s role is to promote fair competition, but also to protect and educate consumers. They have a website where you can file a consumer complaint, and get more information about consumer protection.