Student Loan Consolidation Assistance Slippery Slope of Compliance

Recently the site has received a number of great comments about if student loan consolidation assistance services should be regulated or are already regulated under state laws.You can read all the article on this topic, here.

When talking about compliance issues for student loan assistance programs the argument seems to come down to one of two statements.

We Are Not Performing a Debt Management Service

The response some have is they are not performing a debt management service because they are not modifying the loan but helping consumers to obtain a new loan through consolidation.

If it was found they were getting paid a fee to help adjust or alter the terms of a credit obligation then the state laws would cover them and that would require a lot of licensing, regulation, bonding, and compliance.

We Are Not Performing a Loan Brokering Service

If the company is being paid a fee to arrange for a new loan one position is this might be a loan brokering function and again state regulation is tough in this area.

Some claim they are not brokering the loan.

So Option Three is We Are Doing Neither

If these student loan rescue or assistance companies are not engaging in either debt management activities or loan brokering activities then they are simply performing a form filling service that the consumer could do themselves, for free.

And that’s completely fine as long as the consumer is aware of this. In fact I cover this in How to Run a Clean Student Loan Assistance Program.

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A similar flap over this pay for student loan assistance comes with the debate over the FAFSA.gov and FAFSA.com websites.

FAFSA.gov is the official Federal Student Aid website. It allows people to complete the Free Application for Federal Student Aid online.

As the FAFSA.gov website says, “Free help is available! You do not have to pay to get help or submit your FAFSA. Submit your FAFSA for free online at www.fafsa.gov. Federal Student Aid provides free help online at www.fafsa.gov or you can call 1-800-4-FED-AID (1-800-433-3243).”

Several websites offer help filing the Free Application for Federal Student Aid (FAFSA) for a fee. These sites are not affiliated with or endorsed by the U.S. Department of Education. We urge you not to pay these sites for assistance that you can get for free elsewhere. The official FAFSA is at www.fafsa.gov, and you can get free help from

  • the financial aid office at your college or the college(s) you’re thinking about attending;
  • the FAFSA’s online help at www.fafsa.gov; and
  • the Federal Student Aid Information Center.

If you are asked for your credit card information while filling out the FAFSA online, you are not at the official government site. Remember, the FAFSA site address has .gov in it! – Source

And the FAFSA,gov website says “Don’t tell anyone your Federal Student Aid PIN, even if that person is helping you fill out the FAFSA.” Yet that is what many student loan consolidation assistance companies are requesting from consumers. Red Flag.

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FAFSA.com is a for profit site that charges between $79 and $299 to complete and submit the Department of Education form. Their $299 package does not include a monthly fee and does include “Unlimited FAFSA preparation and assistance for a student’s entire undergraduate studies (up to 8 years).” – Source

They offer a FAFSA form completion service for $99.99. And the FAFSA form involves a lot of data gathering as well. Source.

So if the service bring provided by the student loan consolidation companies is not debt management and loan brokering then it is form filling and apparently a similar service to complete student loan forms already exists at $99.

So what is the justification for some of the student loan consolidation companies to charge $799 and/or a $50 monthly fee for twenty years?

Department of Education Warning

But a warning from the department of education might already exist that applies to the form filling student loan consolidation service. Here is what they say about paying someone to help you find money for college:

Save Your Money

Don’t Pay for Help to Find Money for College

Commercial financial aid advice services can cost well over $1,000. You might have heard or seen these claims at seminars, over the phone from telemarketers, or online:

  1. “Buy now or miss this opportunity.” Don’t give in to pressure tactics. Remember, the “opportunity” is a chance to pay for information you could find yourself for free. Check out our list of free sources of financial aid information below.
  2. “We guarantee you’ll get aid.” A company could claim it fulfilled its promise if you were offered student loans or a $200 scholarship. Is that worth a fee of $1,000 or more?
  3. “I’ve got aid for you; give me your credit card or bank account number.” Never give out a credit card or bank account number unless you know the organization you are giving it to is legitimate. You could be putting yourself at risk of identity theft. – Source

Just something to think about.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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