Here’s a Big Win in the Fight Against Student Loan Forgiveness Scammers

Photo of the campus of the University of California, Berkeley. This image is taken from the window of a building of students walking below.
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Student loan borrowers in California may see some financial relief now that the Federal Trade Commission (FTC) has settled a complaint against a scammer.

Student Debt Relief Group, based in Los Angeles, convinced consumers to pay up to $1,000 to enroll in fake government programs, according to the FTC. Then, the company charged consumers monthly fees toward their student loans.

But the FTC claims none of those fees went toward actual student loan payments. And the government programs they were supposed to be enrolled in? Consumers could have signed up for those on their own for free.

The operation stole more than $7.3 million from consumers, the FTC says.

“To prevent customers from discovering the scam, the defendants cut consumers off from their loan servicers and the Department of Education by instructing customers to stop all communication with those entities,” the FTC alleged in a release. In many cases, borrowers’ Social Security numbers and Federal Student Aid (FSA) ID numbers were compromised.

The proposed settlement order bans Student Debt Relief Group from “engaging in any type of debt relief activities.” It has a pretty big bill to pay, too: More than $2.3 million will go back to affected consumers.

Don’t Miss This Season of Operation Game of Loans

This complaint was part of a recent FTC initiative called Operation Game of Loans. Working with 11 states and Washington, D.C., the FTC is going after illegal student loan repayment programs.

The FTC settled charges with another alleged student loan scammer in May.

Scams can be hard to spot, but the FTC has a few tips for avoiding them:

  • Never pay upfront fees.
  • Never share your FSA ID.
  • Don’t believe anyone who promises they can get your loans forgiven.

If you have federal student loans, “there’s nothing a company can do for you that you cannot do yourself for free,” the FTC warns.

Think you’ve been a victim of a scam? File a complaint with the FTC, the Consumer Financial Protection Bureau and your state’s attorney general.

Lisa Rowan is a senior writer at The Penny Hoarder.