Student Loan Financial Assistance LLC has preyed on the anxiety and confusion of student loan borrowers by misrepresenting the cost and features of federal loan repayment programs in order to extract as many fees as possible, a proposed class action alleges.
The 30-page lawsuit claims that Student Loan Financial Assistance and its chief officer “work to gain customers’ trust” by issuing misleading statements that serve to make the company appear to work for or be affiliated with the U.S. Department of Education, the government or an individual’s student loan servicer. The defendants then purport to provide debt relief services, falsely claiming that they can save borrowers substantial amounts of money by reducing their monthly payment and/or completely eliminating their debt, the suit says.
Moreover, Student Loan Financial Assistance claims to have in-house lawyers who can offer expert debt relief services, the case says, and the company allegedly charges roughly $1,000 in upfront fees for loan consolidation and program placement services. According to the filing, however, the fees charged by the defendants are not applied to a borrower’s loan, and the free service of consolidating a loan through the Department of Education “does not transpire,” the lawsuit claims.
Overall, Student Loan Financial Assistance leaves borrowers wholly unaware that they can apply for loan repayment and forgiveness programs, including income-driven repayment programs, through the Department of Education or their student loan servicers at no cost, the complaint alleges.
According to the suit, Student Loan Financial Assistance misleads consumers on hard sales calls with regard to their student loan repayment options, and leads borrowers to believe the process of consolidating their loans and entering into an income-driven repayment program is “excessively time consuming” and does not guarantee they will be placed into the best program. The defendants also mislead borrowers with regard to the apparent “team of attorneys” available to assist them, as “no such licensed attorneys are employed by the Defendants,” the lawsuit alleges.
The case claims Student Loan Financial Assistance’s representations that it can procure a permanent reduction in consumers’ monthly payments are likewise false, or at least unsubstantiated, because none of the Department of Education’s income-driven repayment programs guarantee consumers a fixed, reduced monthly payment for more than one year. Under the Department of Education’s programs, monthly payments fluctuate based on a consumer’s income each year, which the borrower must recertify annually, and the amount forgiven is dependent on what remains unpaid at the end of the repayment period, the case says.
“In many cases, consumers’ income will rise over the years-long repayment period, and as consumers’ income rises, so will their monthly payment each year,” the suit reads. “As a result, the amount that would be forgiven at the end of the repayment term typically would be less than Defendants have promised.”
The case goes on to allege that in order for Student Loan Financial Assistance to determine if a consumer is eligible for “their” program (the case notes that consumers often believe the defendants themselves are reducing their loan payment or changing the terms instead of merely acting as a middleman), the company asks the borrower to provide their private FSA password. The lawsuit alleges the defendant will then change the consumer’s password in order to log in and view their private loan information.
With regard to the apparent process of actually working with the defendant, the lawsuit claims Student Loan Financial Assistance, after informing a consumer that they’re eligible or “preapproved” for a forgiveness program, will tell the borrower that to enroll in the federal program, they must pay monthly fees that add up to roughly $1,000. In truth, none of the Department of Education’s programs require an advance fee or any fee to apply. During calls with consumers, the defendant’s agents “obtain the consumers’ bank, debit or other payment information,” and begin collecting fees immediately, before the borrower has been entered into any program, the suit alleges.
Although the defendant represents that the amount they pay in fees will be their new, reduced monthly loan payment, this is not the case, the complaint says.
“Defendants collect and retain these monthly fees, however they do not apply the monthly fees to pay down consumers’ loans, as consumers are led to believe,” the suit claims.
Student Loan Financial Assistance also misrepresents the family size and employment on consumers’ applications so that it appears the individual has a lower monthly rate, the lawsuit alleges. The suit further claims the defendants “take actions that may be detrimental to consumers’ ability to repay their loans,” such as routinely consolidating loans even though under certain Department of Education programs this could cause a borrower to lose credit for payments already made.
“Defendants also refuse to provide refunds to consumers who request them after learning Defendants had scammed them,” the complaint alleges.
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