CHICAGO, IL â”€ Illinois Attorney General Lisa Madigan called on the U.S. Department of Education to initiate a program to provide certified nonprofit credit counselors for the millions of student loan borrowers seeking help to repay their federal student loans. Madigan said more qualified sources for help are needed as an industry of scam operations are increasingly targeting and exploiting borrowers for profit.
In a letter to Secretary Arne Duncan, Madigan urged the Department to adopt a program to certify nonprofit credit counselors who can serve as legitimate sources of help for borrowers in need of counseling on their repayment options, in particular borrowers who are in default. Madigan pointed to the counselors certified by the U.S. Department of Housing and Urban Development in the wake of the housing crisis that provided extensive support and resources for struggling homeowners.
â€œStudent loan borrowers have nowhere to turn right now to access legitimate information and assistance about their repayment options,â€ Attorney General Madigan said. â€œIt is critical that we provide these borrowers a lifeline before they make costly mistakes by turning to scam artists for help.â€
Madiganâ€™s letter comes amid a growing need for help among the millions of student loan holders nationwide who are not receiving adequate counseling from their student loan servicers to manage their debt load effectively. As student loan debt has climbed to $1.2 trillion nationwide, an industry of scam artists has taken notice. Student loan debt relief scams advertise on the radio, the internet and television, offering â€œfreeâ€ consulting help to dramatically reduce payments or forgive student loan debt. Borrowers have paid as much as $1,200 to these scam artists in exchange for little to no help with their repayment options.
Last year, Madigan became the first state attorney general to file suit against student loan debt relief scams and has filed a total of seven lawsuits seeking to shut down operations across the country.
Madigan said the tactics of this emerging industry of scams are similar to what took place in the mortgage industry following the housing marketâ€™s collapse. The ads often allude to affiliations with the federal government and suggest they can help student loan borrowers navigate government bureaucracy when seeking repayment plans. What these advertisements fail to disclose is their assistance will cost the borrower an upfront fee ranging between $650 to $1,250 and additional ongoing monthly payments. Borrowers receive little to no assistance in return.
With student loan debt now the second largest source of consumer debt in the country, Madigan said it is critical that the federal government respond and initiate a program to certify counselors to properly advise the estimated 40 million Americans who hold outstanding student loan debt.
Attorney General Madigan is a national leader in investigating and enforcing consumer protection violations in the higher education field. She is leading a multistate investigation into the student loan provider Sallie Mae, now Navient, and she has pursued litigation against national for-profit colleges for fraudulent marketing practices. Madigan has also testified about the role of states in higher education before the U.S. Senate, including a call for stronger protections under federal law for student loan borrowers.
In addition to her lawsuits against student loan debt relief scams, Madigan created a new helpline within her office to assist student loan borrowers. Madiganâ€™s Student Loan Helpline, 1(800) 455-2456 (TTY: 1 (800) 964-3013), is answered by trained staff in her office who can assist borrowers understand their repayment options and how to avoid default. Callers to the helpline can also file complaints with Madiganâ€™s Consumer Fraud Bureau if they have problems with their loans or complaints of similar student loan debt relief scams. Information about the helpline and legitimate student loan debt relief can also be found on Madiganâ€™s website.