Thousands of student loan borrowers are set to receive refunds totaling $4.1 million after falling victim to debt relief scammers, the Federal Trade Commission (FTC) announced. The scheme, operating under various names such as Mission Hills Federal and The Student Loan Group, enticed borrowers with promises of affordable repayment plans or complete debt forgiveness. However, instead of fulfilling these promises, the scammers fraudulently pocketed borrowers’ monthly loan payments.
The FTC filed a complaint against the scheme in 2019, revealing that since 2014, it had deceived students into paying illegal upfront fees and fake loan payments, resulting in substantial financial losses for victims. On average, each victim is expected to receive a refund of nearly $150, although individual refund amounts may vary. The scammers manipulated vulnerable borrowers by falsely claiming to take over the servicing of their loans and instructing them to redirect their monthly payments to the scammers instead of their loan servicers.
In reality, the scammers misappropriated consumers’ payments, with little to no funds actually being applied to borrowers’ student loans. Moreover, they often facilitated actions such as forbearance or deferment to avoid detection by lenders, leaving borrowers unaware of the non-payment status of their loans. Telemarketers enticed victims with unrealistically low monthly payment quotes, further deceiving borrowers into believing they were receiving legitimate assistance.
The consequences for victims were severe, as many incurred additional interest on their loans due to non-payment. Those who have questions about their refund are encouraged to visit the FTC website for assistance. The prevalence of student loan debt in the United States remains a significant issue, with Americans collectively owing approximately $1.6 trillion in federal student loans. While President Biden’s plan to cancel a portion of student debt was overturned by the Supreme Court, the administration has taken steps to alleviate the burden of student loans, resulting in the cancellation of loans totaling $136.6 billion for over 3.7 million borrowers under the Biden administration.