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COMMENTARY: Your legal rights: Student loan assistance scams

Student loan debt has reached historic levels in the U.S.

Over 40 million Americans owe over $1.4 trillion in student loans. Student loan assistance scams take advantage of this growing debt by promising help that is "too good to be true."

How the scheme works

Some companies have websites with promises to reduce, forgive or eliminate student loan debt. Don't be fooled. The U.S. Department of Education (DOE) offers loan forgiveness, cancellation or discharge in certain limited situations, but borrowers cannot qualify merely by making a few payments.

Some companies try to hide that they charge thousands of dollars for something borrowers can do for free: submit applications to the DOE for loan consolidation, forgiveness or alternative repayment plans. They often falsely claim to have "inside information" or special relationships with the DOE to dupe borrowers into paying them.

Free government programs

The U.S. Department of Education allows federal student loan borrowers to consolidate (i.e., combine) multiple federal loans into one loan, resulting in a single monthly payment. Most types of federal student loans can be consolidated.

Borrowers can also apply for an income-based repayment plan, which sets monthly student loan payments at an amount based on income and family size.

Borrowers who work for the government, non-profit organizations or public interest employers may be eligible for the Public Service Loan Forgiveness Program, which forgives their remaining student loan debt after 120 monthly payments are made under an income-based repayment plan. For more information about how you can submit an application for free, visit www.studentaid.ed.gov/sa/repay-loans/.

Tips to avoid these scams

To spot scams, watch for these red flags:

• Promises of immediate loan forgiveness or cancellation.

• High upfront fees.

• Requests for a student's Federal Student Aid PIN. (The U.S. Department of Education advises borrowers against giving their PIN to others.)

The Debt Settlement Services Act

Minnesota's Debt Settlement Services Act (Minn. Stat. Ch. 332B) requires companies to register with the Minnesota Department of Commerce before providing student loan debt relief services to Minnesota residents. These companies may not charge fees before they do the work.

If you have questions about a student loan assistance company, or to see if a company is authorized to provide debt relief services, contact the Minnesota Department of Commerce at Minnesota Department of Commerce, 85 East Seventh Place, Suite 280, St. Paul, MN 55101. Call 651-539-1500 or 800-657-3602 or go to www.mn.gov/commerce.

If you have been contacted by a student loan assistance scammer, you may report the matter to the Minnesota Attorney General's Office.

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