Student Debt Relief Companies
Before paying any company to help reduce your student loan debt, make sure you know about free student loan assistance. Very often, you can receive the same relief at no cost by working with your student loan servicer. If you decide to pay a company, first read the information below about your rights when interacting with these companies.
Student debt relief companies, sometimes called student debt consultants, are companies that claim they can save you a large percentage of your monthly student loan payments. These companies generally obtain lower monthly payments not through their own programs, but by assisting borrowers in completing the paperwork required to consolidate their outstanding student loan debt into a single, new loan issued by the U.S. Department of Education and by repaying that loan under an income-based plan.
You do NOT need to pay to enroll in the many borrower assistance programs that the federal government provides for free.
These programs include loan consolidation, income-based repayment plans, and loan forgiveness. The government even provides options to borrowers who have already defaulted, such as loan rehabilitation.
New York law regulates companies that advertise or offer student debt relief. You can read about the specific types of companies and services that are covered here, however the following are generally not considered student debt relief companies and generally offer free assistance:
- Your student loan servicer;
- A bank or credit union;
- A non-profit organization that offers counseling or advice to loan borrowers;
- An attorney admitted to practice law in New York when that attorney is providing student loan counseling free of charge; or
- A public or non-profit post-secondary educational institution.
If any person or company offers to assist you with your student loan for a fee, they are likely a student debt relief company regulated by New York law.
In any advertisements in New York, student debt relief companies must clearly and conspicuously disclose the following:
- The actual services that they provide borrowers;
- That borrowers may apply for consolidation loans from the U.S. Department of Education at no cost;
- That the debt relief company’s services may not be the best or only option for borrowers;
- That additional federal government repayment plans may exist that do not require loan consolidation; and
- That borrowers should consider consulting their student loan servicer before signing any legal documents concerning a student loan.
If you see a student debt relief company advertisement that does not contain this information, that company may not be complying with New York law. You can file a complaint about a non-compliant student debt relief company, or about an advertisement that you think is deceptive, with the New York State Department of Financial Services.
New York law mandates that student debt relief companies comply with several specific requirements when working with New York student loan borrowers.
Student debt relief companies in New York may NOT do the following:
- Work with a New York-based student loan borrower without first having a legal written and fully-signed contract, and cannot induce a borrower to sign a contract that does not comply with New York law;
- Request or accept any payments for their services, including into an escrow or holding account, before the full completion of all services;
- Take Power of Attorney from a borrower;
- Take and keep any original documents related to the borrower’s student loan;
- Request or accept a borrower’s “FSA ID,” which is required to log into a borrower’s federal student loan account;
- State or imply that a borrower will not be able to obtain student loan relief on their own;
- Misrepresent or imply that the company is part of, affiliated with, or working for the government, government loan programs, or the borrower’s student loan servicer;
- Misrepresent or imply that the fees paid to the company will be applied to the borrower’s student loan; or
- Engage in any unfair, deceptive, or abusive act or practice.
Student debt relief companies must also make specific disclosures in and follow specific rules for their contracts.
Student debt relief companies are required to have a legal, written, and fully-signed contract before providing any student loan services to borrowers in New York.
The contract will represent the entire agreement between the borrower and the company, and the company must give the borrower the opportunity to read a written version of the contract for review before signing. The written copy must be in at least 12-point font and must be in the same language that the company and borrower used when discussing the services the company would provide.
The contract must contain the following:
- The exact nature of the services to be provided by the company or anyone working with the company;
- The total amount of payment or compensation for such services;
- The company’s contact information, including name, business address, telephone number, and facsimile number or email address;
- The following statement, in 14-point bold font, with the blank spaces filled in:
"NOTICE REQUIRED BY NEW YORK LAW You may cancel this contract, without any penalty or obligation, at any time before midnight of .......... (fifth business day after execution). .......... (Name of consultant) (the "Consultant") or anyone working for the Consultant may not take any money from you or ask you for money until the consultant has completely finished doing everything this Contract says the Consultant will do. You should consider contacting your student loan servicer before signing any legal document concerning your student loan. In addition, you may want to visit the New York State Department of Financial Services' student lending resource center at www.dfs.ny.gov/studentprotection. The law requires that this contract contain the entire agreement between you and the Provider. You should not rely upon any other written or oral agreement or promise."
The contract must be dated and signed by both the company and the borrower, and witnessed and acknowledged by a notary public.
Student loan borrowers in New York have the right to cancel a contract with a student debt relief company within five business days of signing the contract. Borrowers can cancel the contract by sending a notice of cancellation to the company. Two such notices of cancellation must be included with the contract and provided to the borrower with delivery and timing instructions. Once a contract is cancelled, the borrower will have no obligations toward the company, and the company must return any signed documents to the borrower.
If you worked with a student debt relief company and you think they violated any of the terms discussed here or in the New York law that regulates their conduct, you should file a complaint with the New York State Department of Financial Services.
Additionally, New York law allows for borrowers to bring an independent lawsuit against student debt relief companies that have violated the protections discussed here. If you believe that a student debt relief company has harmed you, in addition to filing a complaint with the State, you should contact a lawyer. If you cannot afford a lawyer, you can contact a local free legal services organization.
The New York State Department of Financial Services has a variety of resources on its website dedicated to student loan counseling and debt relief. Please review these resources to learn more about loan repayment options. After reviewing your options, you should contact your student loan servicer to discuss what is best for you.
If you have federal loans and cannot afford your monthly payments, you should consider income-based or income-driven repayment plans, which will base your monthly payments on a percentage of your monthly income and could result in $0 payments. The federal government offers these plans for federal loans at no cost.
If you have defaulted on your federal loans, you should consider loan rehabilitation.
Repayment options for private student loans vary by private student lender, so you should contact your loan servicer to inquire about what options are available to you.
In New York, student loan borrowers have specific rights when dealing with their student loan servicer, in addition to those discussed here for student debt relief companies. Review the New York Student Loan Borrower Bill of Rights to learn about your rights.
If you experience any issues with your student loan servicer, or think that your rights under the New York Student Loan Borrower Bill of Rights have been violated, file a complaint with the New York State Department of Financial Services.
To learn more about student loan repayment options, you can contact your federal student loan servicer or visit the Federal Department of Education or the Consumer Financial Protection Bureau's interactive student loan repayment guide.