The Federal Trade Commission filed a lawsuit claiming some student loan debt relief companies duped student loan borrowers out of money they thought was going to help pay off their debt.
The FTC said Arete Financial Group and related companies claimed to work directly with the U.S. Department of Education so borrowers thought they were legitimate.
The lawsuit said the company required upfront fees up to $1,800 plus monthly fees.
It said the companies claimed the money went to paying off the loan balance.
"Instead they usually placed the loans into what we call a temporary forbearance process or deferment status often without the consumer's consent,” FTC Regional Director Chuck Harwood said.
That meant interest kept adding up.
The FTC said the companies would ask for the federal student aid login information and would change the password so only the company could access the account.
"Students or borrowers really had no idea what was going on and didn't realize that their loans were not being paid off,” Harwood said.
More than 42 million Americans owe about $1.5 trillion in student loan debt according to the FTC.
"I freak out to even think about looking at what I owe,” student loan borrower Anthony Lucas said. "You have these companies really taking advantage of some of these naïve and impressionable kids that just want to get ahead."
The FTC said borrowers should never fall for promises of a quick fix for student loan debt. It takes time and commitment.
Harwood said borrowers should never pay an upfront fee for any kind of loan debt relief service.
We contacted Arete Financial Group for comment but haven’t heard back.
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