Student Loan News: FTC Makes Scammers Pay; Student Loan Benefits Grow

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Welcome to Student Loan News, a weekly summary of developments and events affecting college debt in the U.S. Join us each Friday for a look at goings-on that could impact your own student loan situation.

Federal Trade Commission reimburses 40,000 defrauded borrowers

Federal Trade Commission announced Monday that it was sending more than $5.4 million to nearly 40,000 borrowers who fell victim to student loan scams.

The payout went to former customers of a group of Los Angeles-based companies that made at least $20 million off of false promises of student debt relief in exchange for an up-front fee of $1,000. Almost 40,000 borrowers who sent money to these scammers will get back an average of $135.48 each from the FTC.

How it affects YOU: If you’ve ever received a call or email offering student loan cancellation for a fee, you likely were the target of student loan scammers — and, of course, there are many such fraudsters out there. Remember that you should never have to pay a fee to have your student loan forgiven or your payments adjusted. The only exception would be if you hire a student loan counselor or lawyer — but in that case, make sure you’re working with a reputable professional who isn’t offering promises that seem (and probably are) too good to be true.

Twice as many employers now offering student loan repayment benefits

With 45 million Americans owing student loans, some employers are stepping in to help. According to the 2019 Employee Benefits Report by the Society for Human Management, twice as many companies are offering student loan repayment assistance in 2019 as were in 2018.

Major companies that have instituted student loan repayment assistance programs for employees in recent years include Staples (up to $3,600 in repayment benefits) and Fidelity Investments (granting up to a maximum of $10,000).

But while this trend is growing, it’s still a rarity among most companies. According to the report, only 8% of employers currently offer a student loan matching benefit to their indebted employees, even though that’s double what it was in 2018.

How it affects YOU: If you have student debt and are searching for a job, keep an eye out for companies that offer a student loan matching benefit. And if not, explore alternative options for student loan repayment assistance or forgiveness. Depending on your occupation, you could gain a significant amount of help paying back your student loans.

Also in the news…

  • As Congress works on reauthorizing the Higher Education Act, the Hispanic Caucus has offered a list of proposals, include expanding federal aid to undocumented and incarcerated students, and increasing Pell Grants and federal funding for minority-serving institutions.
  • A recent report from the Institute on Assets and Social Policy at Brandeis University found that the median black student loan borrower still owes 95% of their debt 20 years after starting college, while the median white borrower has paid off 94% of their debt in that same time period. A previous Student Loan Hero study has shown some aspects of the student debt crisis weigh disproportionately on students of color.
  • About 15 colleges — most of which are for-profit schools — look set to lose federal funding because the default rates among their graduates are too high, Politico reported late last week.
  • A federal judge ruled in Harvard’s favor in a high-profile affirmative action case, saying that its use of race in admissions was constitutional, Politico said in a separate report. While opponents argue that Harvard’s use of affirmative action discriminates against Asian-American applicants, the judge said that it wasn’t time to “close the curtain on race conscious admissions policies.”

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Published in News & Policy, Student Loans

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