Showing posts with label student debt relief scheme. Show all posts
Showing posts with label student debt relief scheme. Show all posts

Wednesday, March 16, 2016

Hucksters preying on student-loan debtors: They should go to jail

In December 2014, the Consumer Financial Protection Bureau filed a federal lawsuit against an outfit called Student Loan Processing.US (SLP) and James Krause, the company's sole owner. CFPB accused Krause and SLP of preying on unsuspecting student-loan borrowers who were looking for help in obtaining relief from oppressive student-loan debt.

According to CFPB, the defendants "charged consumers illegal upfront enrollment fees before providing any services, deceived customers about the cost of their services, and falsely represented an affiliation with the Department of Education." Specifically, the Bureau accused Krause and SLP of charging student-loan debtors an upfront fee for debt-relief services that debtors could have have obtained for themselves for free and then charging a $39 monthly fee every month for the entire repayment period.CFPB claimed in its complaint that SLP received "millions of dollars" from student-loan debtors and that it "misrepresented to consumers, directly or by implication, that they were agents of the U.S. Department of Education or were affiliated with it in some capacity."

Apparently, student borrowers who used SLP's services to refinance their loan in a long-term income-based repayment plan would pay $39 a month to SLP for the entire repayment period, which could be up to 20 or 25 years! And borrowers whose income was so low that they would pay nothing under an income-based repayment plan would still pay SLP $39 a month.

CFB announced this week that the case is about to be settled. The Bureau released a proposed stipulated final judgment whereby SLP will stop its activities but will "neither admit nor deny any allegations in [CFPB's]complaint" except as stated in the court's final order.

So--case closed.

But Student Loan Processing isn't the only huckster preying on distressed student-loan debtors. In a article, Maggie McGrath listed nine other  companies operating in several states that were being sued by state or federal agencies for engaging in similar practices.

So what can we say about Student Loan Processing.US and similar companies? First of all,the government should do more than sue these predators in civil court; people who profit from preying on desperate student debtors should be prosecuted and sent to jail.

And if it is not a crime to do what CFPB accused SLP of doing, then it should be. President Obama should recommend new legislation to criminalize predatory behavior against student debtors, and Congress should take action.

In my view, these sleazy so-called "student debt relief" companies are just another sign that the government's wild scheme of moving college-loan borrowers into long-term income-based repayment plans is a failure. Even if these poor debtors are not fleeced by hucksters, they are forced into repayment plans that can stretch over their entire lives.  As I explained in an earlier blog, Brenda Butler, who graduated from college in 1995, struggled for many years to repay her student loans. Although she repaid more than the amount she borrowed, the total amount she owed doubled due to penalties and accrued interest. Finally, she defaulted and then entered into a 25-year income-based repayment plan. Butler won't be finished paying off her student-loan debt until 2037--42 years after graduating from college! And a heartless bankruptcy judge denied her request for a discharge of her student-loan debt.

Most people who sign up for long-term repayment plans will make monthly loan payments that are so low that interest continues to accrue, which means these borrowers will never pay off their loans. Thus, they will be on a treadmill, making token payments for as long as a quarter of a century.

There is only one way out of this quagmire of student-loan debt--now totally $1.3 trillion  People who can't pay back their student loans and still maintain a decent standard of living should be able to discharge their loan obligations in bankruptcy court.

Some day, this simple reality will be apparent to everyone. But until that day comes, millions of Americans are suffering.


CFPB Takes Action to Shut Down Illegal Student Debt Relief Scheme. Consumer Financial Protection Bureau, March 15, 2016. Accessible at

Maggie McGrath. Student Debt Dishonor Roll: Meet the Hucksters Preying on Desperate Student Debtors., July 29, 2015. Accessible at