As of June, nearly 41 million people had outstanding U.S. Federal Student Loan debt, according to Federal Student Aid.
Spring 2015 graduates who borrowed money for college are now receiving bills to make their first re-payment next month. Some may need to lower payments through consolidation or income based-repayment plans.
Right now, the Better Business Bureau of Northeast Wisconsin is warning about for-profit companies they say take advantage of graduates who need help with loan re-payment. They warn that some people are fooled into paying for help that’s available for free through the loan’s servicer (the company that takes care of the billing and servicing on the loan).
“I can’t exactly call it a scam, but there are companies that are operating legally and they are providing a service for you and expecting to get paid,” said Susan Bach of the Better Business Bureau. “The problem is that you can do this yourself for free.”
Bach said graduates can use the Department of Education’s free website for information on consolidation and re-payment, too.
Bach warns that for-profit companies carry red flags: asking to sign a power of attorney or for large sums of payment upfront; or they make big promises such as dramatic payment cuts, or even offering to eliminate the debt completely.”
“Ask yourself, why all of the sudden are my payments going to be cut in half or a fraction? Is it because I’m going to be paying more in longer terms?” Bach said.
Student loan re-payment has become a political topic, too.
In early October, lawmakers in Madison held a committee hearing on a Democratic bill to allow graduates to re-finance student loans at lower percentage rates.
“Our bill basically would try to correct something that went on in the federal government where they didn’t allow the students to refinance. So we’ve got people at eight, nine ten, in some cases fifteen sixteen percent,” said Democratic Senator Dave Hansen of District 30. “The bill makes sense because there are people out there really hurting.”
Hansen said he and other Democrats are optimistically pushing for another hearing in the assembly to get the bill to a vote, though a similar bill was rejected last term.