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Student Loan Debtors Bamboozled Again

I know a lot of you out there don't have sympathy for student loan debtors who complain about their debt.

You see it as a matter of personal responsibility – they chose to sign a contract and so should suck it up and uphold their end of the deal.

Money Morning's Capital Wave Strategist Shah Gilani says it best, though:

"You're not wrong. But there are other forces exerting outside influence on the inner intentions of a lot of 'students' susceptible to being sold a bill of goods. Sometimes we're stupid for being conned, and sometimes the con is just so cleverly concealed."

Think of all the branding, marketing, and pressure swirling around the heads of these young folks.

And many don't have parents or educators taking the time to sit down and weigh the options with them.

If I haven't conjured any sympathy out of you yet, a report recently issued by the National Consumer Law Center identifies a new abuse of student loan debtors:

They are being deceived into paying up to $1,600 in initial fees, and monthly fees as high as $50, to private "debt relief firms" for help that they could otherwise get for free.

It's a problem of transparency.

These firms claim to help a student loan debtor to reduce or manage their debts.

Some firms are clear about the services they provide and where any fees they charge are coming from.

But most firms aren't.

And most firms simply collect the information from their "clients" that is required on government application forms – the same government application forms that are readily available online and can be submitted for free.

The report concludes:

"At a minimum, it is deceptive that most of the companies fail to prominently disclose that 'their' programs are actually federal government programs that an individual can access on her own at no cost."

Moreover, some of these firms are utilizing unconscionable mandatory arbitration clauses that require borrowers to sign over a power of attorney, among other highly private information, in blatant violation of consumer protection laws.

One great way to cut down on these predatory debt relief schemes would be for the government to improve the administration of its own programs.

Student debtors don't realize what's available to them for free.

Or, even if they do, they can't navigate through all the red tape.

Have I convinced any of you to have a heart for our student loan debtors?

Please comment below and let us know what you think!

There might light at the end of the tunnel for some student loan debtors. Find out how one law student exposed the secret to wiping out student loan debt in bankruptcy.

Join the conversation. Click here to jump to comments…

  1. Melia Sese | June 30, 2013

    Absolutely – all of my five children ran up six-figure loan balances. Fortunately, they are getting them paid off because all of them have high-paying jobs. Long ago, I prevailed upon them that they were to use college (both undergrad and grad) as a means of getting into a high-paying profession – in health care, engineering or information tech – and that it would be shameful to our family if they had to default on any of that debt. Unfortunately, not everyone is so focused and the government certainly doesn't tell you that (for various reasons) you still owe the money even if you cannot get a job.

    • Tara Clarke | July 1, 2013

      Great comment, thank you Melia Sese. Your kids are lucky they had you to paint the big picture before they made any higher education decisions.

    • Helene Augustine | July 1, 2013

      Better communication to students
      AND laws that protect students indeed everyone since these loans are targeted to
      those people who are in a desperate situation and uninformed

  2. Anita Clara | July 1, 2013

    Student loan debtors have been further bamboozled by our beloved federal government which just doubled the interest rate on their student loans! How many of them voted for "hope and change?"

  3. Debra NJ | July 1, 2013

    Perhaps a look at local county and state (where you live) colleges can help to keep your costs lower. First year classes seem to be mostly required fields for all students: like English 101, history choices and some other elective classes. Check to see which will transfer ( most do) to the college you are looking to graduate from. By getting some credits from other sources the cost can be reduced significantly,with little if any impact to the education degree or learning material. By taking 1 extra 3 credit course per semester and a class or 2 over winter or summer breaks the number of semesters needed to acquire the degree could be shortened. This would save money from room and board costs as well as getting into the work force earlier. It worked for me. BA in 3.5 years, degree from Rowan university (NJ) no debt.

  4. Ken DeVo | July 1, 2013

    When I lost my job in 2001, I told my kids that my wife & I could not afford college for my 2 kids.
    However, if they could work or get scholarships I would pay 1/2 and they would pay 1/2. For 6 years, I worked for $8.50 – $10 per hour to get the college degrees without going into debt. I was a certified electrical engineer before I lost my job. My kids both have decent jobs (I do not) and all of us are debt free!!!

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