Student loans make list of top Illinois consumer scams for the first time
With student debt now totaling about $1.2 trillion and pay for recent college graduates stuck in the doldrums, scams targeting people struggling with student loans have been proliferating and now rank in the top 10 consumer scams in Illinois, Attorney General Lisa Madigan said Monday.
Each year, Madigan announces the state's top 10 scams, and this was the first time student loans made the list. They rank seventh, totaling about 1,500 of the 25,094 complaints her office received in 2015. For the eighth year in a row, consumer debt ranked at the top of the list with complaints such as abusive debt collection practices, mortgage lending and payday loans. Identity theft is number two.
As student debt has soared during the last few years, Madigan said many of the scammers who used to defraud people with mortgage relief scams have now branched out into student loans. They often promise relief from debt but get people to make upfront payments of hundreds of dollars and then provide no relief, she said.
On Friday, Madigan's office filed a suit against Lombard-based National Student Loan Rescue and one of its principals, Gregory Kewin. The lawsuit alleges consumer fraud and deceptive business practice. The firm allegedly advertised it would get student loans out of default, remove wage garnishments, lower monthly payments and secure loan forgiveness, but didn't deliver after accepting upfront fees.
Instead, the complaint said the firm "does little more than complete applications to federal borrower assistance programs that are already available to consumers for free."
National Student Loan Rescue did not respond to questions, and a person answering the firm's "800" telephone number said Kewin was no longer working there. Further efforts to reach Kewin were unsuccessful.
Madigan noted that there is no reason for student loan borrowers to pay fees for help.
If people have federal student loans, there are programs in place that provide relief to borrowers who cannot afford their loan payments. Under the government's income-based repayment program, borrowers can have their monthly payments reduced to fit their incomes, and the individual doesn't have to pay a fee to get the reduction.
But Madigan noted that many people call their student loan servicers, or the agents handling loans on behalf of the government, and "rarely get any real help." When borrowers "can't get help they turn to scam artists," she said.
Madigan faulted the federal government's student loan servicers for "keeping people in debt" and becoming unable to contribute to the economy through purchases such as buying cars. She noted that instead of offering income-based repayment, the servicers rely on the "quickest" approach. It's known as forbearance. If borrowers can't pay, forbearance gives them temporary relief from payments, but interest charges are added to their loans and must be paid later. This creates a cycle of debt that is hard to recover from later, Madigan said.
The Government Accountability Office in September said in a report that half of people with student loan payments would qualify to pay less under the income-based repayment program, but only 13 percent are savvy enough to set up payments that would be less harsh. It faulted the Department of Education for failing to make students aware that their student loan payments could be reduced if their income isn't large enough to handle existing payments.
Madigan said borrowers should never pay for information on paying back any loan, and that consumers can spot scammers simply by noting requests for upfront payments. She said the law prohibits anyone from collecting upfront fees for assistance with any consumer debt.
The attorney general's office provides student borrowers with help on repayment options at 800-455-2456. If student borrowers are having trouble with their loan servicer, advice is also available at 877-557-2575 or www.ombudsman.ed.gov. To understand student loan rules, see www.studentaid.ed.gov.
Here are the top Illinois scam complaints from last year, ranked by number of complaints to the attorney general's office:
1. Consumer debt (mortgages, collection agencies, banks): 3,350
2. Identity theft (government document fraud, credit cards, utilities, data breaches): 2,636
3. Telecommunications (telemarketing, cable and satellite TV, phone service and repairs, cellphones): 2,188
4. Construction/home improvement (remodeling, roofs and gutters, heating and cooling, plumbing): 2,167
5. Used auto sales/motor vehicles (as-is used cars, financing, warranties): 1,835
6. Promotions/schemes (phone scams, investment schemes, lottery scams, phishing): 1,813
7. Education (for-profit schools, student loan debt, loan counseling): 1,523
8. Internet/mail-order products (Internet and catalog purchases, TV and radio advertising): 1,019
9. Fraud against business (consulting services, equipment leasing, directories and publications): 726
10. Motor vehicle/Non-warranty repair (collision, engines, oil changes and tuneups): 714