Mass. AG Cracks Down On Debt Service Companies, Creates Student Loan Unit
Massachusetts Attorney General Maura Healey is taking action against student debt relief companies that she says are preying on vulnerable people.Healey announced Tuesday that Student Loan Processing and Direct Student Aid are no longer allowed to operate in Massachusetts. Together the companies will pay nearly $100,000 in restitution for aggressive marketing practices, misleading borrowers and charging illegal upfront fees. Healey says some 200 people are eligible for monetary relief.
“They were wronged,” Healey said. “They were taken advantage of. Our job will be to continue to work directly with students, get money back in their pockets, make them whole and set them on a better path.”
Joining Healey at the press conference, Amelia Manni explained that she and her mother took out more than $100,000 in loans split between Emmanuel College and Boston University.
“It wasn’t long before we were contacted by a student debt relief company that told us they were going to help us lower our payments and get rid of our student loans within 10 years,” Manni said. “That obviously sounded amazing and something that I wanted to do in order to continue with my life and provide for myself and help out my mom who was always there for me.”
Manni says they signed up with the company in 2014 and were required to fork over a few hundred dollars as a down payment as well as sign up for fee-based services.
“After four months and after I had called my loan company to sign up for grad school, we realized that none of those payments were going toward my student loans,” she said. “I just hadn’t been paying them for the six months since I’d graduated. They also asked to access our student loans and ended up going in and changing all of our information. They took out our phone numbers and addresses and put in their phone numbers and addresses so any communications were no longer coming to us. If anything was happening we weren’t getting any information about it.”
After Manni sought help from the attorney general’s office, the $3,000 thought lost was returned to her and her mom. Hoping to prevent similar experiences, Healey’s office is creating a student loan assistance unit to help people manage their borrowing and get them out of default or delinquency. Healey, a Democrat, says student loan debt in the U.S. has reached a trillion dollars, second only to home mortgage debt.
“A new cottage industry has crept into the market,” Healey said. “These are companies that target vulnerable students and market themselves as being able to help students with their debt. We see this industry of so-called debt consolidation companies or debt relief companies that have sprung up, oftentimes pretending to be affiliated with the federal government, and promising students that they will help them reduce their payments.”
Healey says these companies charge students for services such as loan consolidation, income-based repayment plans and loan forgiveness that are available, often for free, through the federal government. Within Healey’s newly created unit of attorneys borrowers can access a dedicated hotline, webpage and mediation program that will review loans and assist in payment options. Healey says she is also concerned that the cost of college has increased 60 percent since 2000.
“Our office has investigated and brought enforcement actions against a number of predatory, for profit schools,” Healey said. “That work continues and we will continue to be aggressive against that industry to hold accountable for what are really unfair and detrimental practices that leave people worse off from where they started.”