The Consumer Financial Protection Bureau finally halted Student Aid Institute, based in San Diego, for illegally tricking borrowers into paying fees for federal benefits. Many companies in this shady industry prey on holders of the $1.3 trillion outstanding in student debt by misleading borrowers with terms like “student loan forgiveness.” The fraudulent companies pretend to help borrowers obtain lower student loan payments or a reduction in debt. “We see more and more companies and websites demanding large upfront fees to help student loan borrowers enroll in income-driven plans that are available for free,” said Richard Cordray, bureau’s director. Student Aid Institute received millions of dollars in fees by charging borrowers hundreds of dollars upfront and $39 a month in maintenance fees. Persis Yu, director of the National Consumer Law Center’s student loan borrower assistance project, said the debt relief companies were “a huge problem.” In some cases, she said, the companies take over management of a student’s debt, making the minimum payment to the lender but charging the student additional fees that it pockets. (nytimes.com)
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