“Student Loan Consultants” Are on the Rise – But Are They Necessary?
Posted By Donna Fuscaldo on September 30, 2015 at 12:29 pm
With the average student graduating college more than $30,000 in debt – and with many holding multiple loans – it’s not surprising a whole industry has cropped up to help student borrowers figure out their plan of action. Known as student loan consultants, these professionals help families navigate the student loan process, as well as get help if their debt becomes too much to handle. But whether or not you actually need their services depends on your understanding of student loan debt and your current financial situation.
“Sometimes, there is need for some families who are not clear as to what they are looking at with student loans,” says Jean Keller, founder of Keller College Services. “I would love to say colleges make it super easy to understand all the ins and outs, but that often isn’t the case.”
Some student loan debt consultant firms are up to no good
When it comes to student loan consultants, consumers should be careful. Not all companies are created equal, and some may claim to help but will do little more than consolidate your loans for a fee.
Earlier this year, Illinois Attorney General Lisa Madigan launched lawsuits against five companies: Consumer Financial Resources LLC, of Texas, which operated as Student Loan Resolve, Federal Student Loan Alliance LLC, based in California, Florida-based Interactive Education LLC, which operated as Direct Student Aid, the Chicago-based Nationwide Student Aid, and Student Consulting Group Inc., of Georgia, contending that the companies were scamming people who needed to pay back their student loans. According to the suit, the firms charged borrowers big upfront fees for debt relief, but then did nothing to reduce their debt – or, they charged for options that are already available to borrowers for free.
In the lawsuit, Madigan alleged that the companies got some borrowers to pay as much as $1,250 up front for fake or free services, including assistance enrolling in loan forgiveness programs for public service employees like teachers, nurses, police officers, firefighters and employees of non-profit organizations. “Often, these companies employ a one-size-fits-all approach to student loan debt relief, promising complete loan forgiveness without analyzing borrowers’ individual situations to determine whether they are eligible for the programs and without explaining all the required steps borrowers must take to qualify for loan forgiveness,” she said.
Be wary of consultants that charge an up-front fee
Indeed, Mark Kantrowitz, a financial aid expert and publisher of Edvisors.com, says that many of the so-called student loan consultants are doing nothing more than consolidating the borrower’s student loans at StudentLoan.gov, something any borrower can do on their own for free. He says borrowers should be especially wary of companies that charge an up-front fee for credit repair. “You should never pay a fee to consolidate federal student loans or change repayment plans, as borrowers can do this on their own for free at StudentLoans.gov; it takes just a few minutes, says Kantrowitz.
While there are bad apples in the student loan consultant market, not all of the providers are out to harm borrowers. Some can help families who are confused about all the loans they have to pay back, or how to get money for school to begin with. For Rick Ross, co-founder of College Financing Group LLC., much of the work focuses on organizing student loan debt for borrowers and then working with them to meet their goals – whether that’s deferring payments or lowering interest rates. “A good student loan consultant wants to meet the student’s objectives,” says Ross. “Some are looking for manageable monthly payments, while others are looking for repayment help.” College Financing Group charges a one-time flat fee of $275, which is lower than the national average of $400, he says.
Jan Miller, president of Miller Student Loan Consulting LLC., has been helping borrowers with their student loan debt for about five years, and says people thinking of going this route have to choose a consultant wisely. After all, if you go with a debt consolidation service, you may not get the expertise that comes from dealing with someone who is well-versed in both federal and private student loans. If the company won’t offer you a free consultation, Miller says it could be a red flag. Miller charges a one-time fee of $395, and $20 a month after that.
A student loan consultant that’s likely to be beneficial will want to craft an individual plan for you, not just a one-size fits all solution. “A lot of clients have hundreds of thousands of dollars in debt,” says Miller. “Every decision they make with their student loans means tens of thousands of dollars. If you have any concerns at all, seek out the advice of a consultant to find out if you are doing the right thing.”