Relief for Student Loan Borrowers Victimized by “Relief” Companies Masquerading as Legitimate Help

Abstract

Masquerading as legitimate help are companies that target forty-four million borrowers
owing over $1.6 trillion in student loan debt. “Relief” companies purport to help borrowers
struggling to repay student loans but, in fact, inflict irreversible financial harm by charging
borrowers unlawful fees. Often pretending to be affiliated with the U.S. Department of
Education (Education Department), relief companies falsely claim they can enroll borrowers
into income-driven repayment plans and forgiveness programs. Exploiting twenty-first century
technologies, relief companies can now easily reach millions of borrowers by, for example,
making robocalls to cellphones, posting phony five-star reviews on social media, and requiring
borrowers to e-sign documents disclosing their financial information. One company alone
bilked student loan borrowers out of thirty-five million dollars in unlawful fees for bogus relief.

This Article addresses the federal response to widespread fraud by relief companies.
Borrowers can theoretically obtain free help from private companies called “loan servicers,”
which are authorized by the Education Department to assist borrowers with repayment
options. However, under new leadership since 2017, the Education Department has taken
steps to shield loan servicers from being held accountable for alleged unlawful servicing
practices. Similarly, the Bureau of Consumer Financial Protection (CFPB) has implemented
several harmful changes, including closing the only federal office dedicated to assisting student
loan borrowers. In light of harmful actions taken by the CFPB and the Education
Department, this Article proposes that states establish ombudsmen to effectively advocate for
borrowers and eliminate their susceptibility to relief companies falsely promising to help. This
Article also proposes that Congress require the Education Department to implement existing
technology-based solutions to prevent relief companies from taking over borrowers’ online loan
accounts to conceal their fraudulent activities.