It’s a well-known – and all too true – fact that the debt relief industry is filled with a number of unreliable and shady companies and even plain old scams. In fact, on average, there are more untrustworthy companies out there than trustworthy ones, more bad debt relief services than good ones.
The reason that there are so many bad debt relief companies around – and the reason that nearly all of them get a fair amount of business – is that debt is an emotional thing. When you are struggling to meet your monthly minimums or are otherwise hard out financially, your emotions are on overload. It’s a constant worry, a constant tugging at your gut, a constant ‘what if?’ that you want to stop at any cost.
Many people in these situations simply go with a debt company that promises more than they can actually offer. Many of these people are wooed by debt companies that make big claims, offer fancy services, or just advertise wisely. Instead of investigating each and every company to make sure they have a stellar reputation, they jump at the chance to work with the first company that they come across, companies which are often up to no good.
Though there are many different types of debt scams around, a particular scam has become very common as of late. The scam companies tend to focus their feelers on college students that are struggling to pay off their student loan debt. The basics of the scam are simple: they charge outlandish fees for helpful services, but these services are often offered by government assistance programs at no cost at all.
Trickier still is that many of these shady debt relief companies have years of experience in the field are able to skirt the rules just right. They are able to stay barely within the rule book while still cheating struggling students out of their hard-earned cash. If you’re a student or anyone else looking for debt relief, then you need to look out for (and avoid) these companies.
Read on below to find out a little more about what these shady debt relief companies are up to, why their ploy works so well, how you can avoid them, and what your other, better debt relief options are.
What is Going On?
As mentioned above, many shady debt relief companies are targeting worried college students (or post college students) that are seeking debt relief help. They are offering the same services as many government assistance programs but charging huge and unnecessary fees.
Another key factor to the success of these debt relief companies is the fact that federal assistance programs for student loans are oftentimes insanely complicated and complex. The process to receiving help is long and arduous and many students just don’t have the time and patience to complete the seemingly endless sets of hurdles. And even when those that do complete the application process begin to receive aid, they are often unaware of exactly what they signed up for and what the terms of their assistance agreements are.
Though they are charging huge fees, the similar programs offered by shady companies are decidedly much less complicated. They are much easier to become enrolled in and are much easier to understand the terms of.
Why Their Ploy Works So Well
Even with the above information, it is startling that the ploy of shady companies works so well. It is interesting that so many people fork out huge sums of cash for services that they could get for free elsewhere (even if the application process is trickier).
Part of the reason that their ploy works so well is that the debt relief companies are sneaky. They don’t necessarily have to play by the same rules as government programs and take this to heart in their advertising and marketing especially. They invest large sums of cash in their marketing campaigns and make their programs seem like a ‘cure all’ to those struggling with student debt.
Furthermore, most of these shady companies, even the more legit among them (if there is such a thing) fail to let people know that their programs are actually the same as the free assistance programs offered by the government. Instead, they charge fees ranging from $20 to $50 per month along with up-front out-of-pocket fees of $500 to $1000 to $1500.
Many of these debt relief companies also ‘pretend’ to offer other services as well. They advertise that they provide multiple forms of debt relief but push everybody that signs up into loan consolidation. This then gives them the opportunity to have their clients fill out the exact same applications that the government assistance programs use.
The shady companies can then submit these applications online, for no cost. They can then go on to consolidate the client’s loans with nearly no expense to themselves. They are able to keep nearly all of their profits since they don’t have to really invest the money in anything.
How You Can Avoid Them
Though it is fairly straightforward, it still needs to be said here: the only way to avoid shady debt relief companies is to, well, avoid them. If you are reading this and are investigating a way to consolidate your student loans, don’t go to an expensive debt relief company. Rather, go with a free government assistance program instead.
What Are Your Other Options?
The number one option that you have if you are looking for student loan help is to figure out the federal student loan assistance programs. Apply for one of these programs and go through the consolidation process through them. You will be much happier in the long run, even if the initial part of the process is more confusing and takes longer to complete.
Better yet, talk to an experienced individual that you trust. Anyone involved in finances will be able to offer at least basic insight into government assistance programs. You can even talk to a financial advisor at your school (especially if you’re still in college) or hire a credit counselor (many of them are non-profit) for advice.