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Beware of New Student Loan Relief Companies
The commercials ask, “Are you struggling with student loan debt? Call right now for immediate relief.”
For the close to 7 million Americans that have fallen behind on their student loans, and the millions more that are about to, these companies offer relief and a light at the end of the tunnel. Unfortunately that light blinds the truth behind these companies.
“I’m troubled by this,” said Terrence Banks, a student loan counselor at ClearPoint Credit Counseling Solutions, a nonprofit counseling agency, to CNBC. “They prey on people’s emotions to get them to call. They promise relief, but they can make your situation worse.”
Here’s what these ads don’t tell you: The help they promise almost always comes from federal programs that you can access yourself for free.
The National Consumer Law Center recently investigated these companies by secret shopping them, reviewing their websites, contracts and online complaints.
Some of their findings included:
– Inaccurate information being presented to students
– Failing to disclose prices or be told by representatives
– Advertising of multiple services, but only providing loan consolidation
College Costs Increase as Loan Dependency Goes Up
On Tuesday the National Center for Education Statistics, released data showing that 71 percent of all undergraduate students received some type of financial aid in the 2011-12 school year, up from 66 percent four years earlier.
In addition, their study found that forty-two percent of students received federal grants, up from 28 percent, and 40 percent received federal loans, an increase of 5 percentage points. Among full-time, dependent students, access to state grants actually declined, from 29 percent to 26 percent.
This new data comes weeks after President Obama signed a law restoring lower interest rates for millions of college students. The law covers an estimated 18 million loans totaling some $106 billion.
Tuition Starting to Fall at Private, For-Profit Colleges
Like others in the education sector, private, for-profit colleges are starting to lower their tuition due to low enrollments and highly price conscious consumers.
The independent think tank Education Sector reported this week that the average tuition paid by students at four-year, for-profit colleges, when adjusted for inflation, fell from $16,268 in the 2006-2007 academic year to $13,819 in 2011-2012.
Andrew Gillen, Education Sector’s Research Director told The Hechinger Report one reason for this drop is that students are seeking out lower-cost schools, pushing down the average tuition being paid. The other: that the schools are cutting their prices.
By Marc Apple