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Senators seek probe of student debt relief firms

WASHINGTON – A scathing National Consumer Law Center report on education debt relief companies prompted 23 Democratic U.S. senators – including New Mexico’s – on Wednesday to ask federal officials to investigate the firms.

The report, issued June 19, contends private companies are using deceptive practices – such as charging for services that the government provides for free and mischaracterizing federal government loan service programs as their own – to entice already cash-strapped debtors to spend more money than required. The report found that private companies are charging up to $1,600 upfront and $20 to $50 in monthly fees to participate in free federal repayment programs.

The report also accused student loan debt relief companies of failing to safeguard consumer financial information and possibly violating the Credit Repair Organizations Act and the Telemarketing Sales Rule by requiring payment before providing any assistance.

In a letter to U.S. Education Secretary Arne Duncan, Edith Ramirez, chairwoman of the Federal Trade Commission, and Richard Cordray, the newly confirmed director of the Consumer Financial Protection Bureau, the senators asked for government intervention.

Sens. Tom Udall and Martin Heinrich, both New Mexico Democrats, both signed on to the letter.

“Existing law should be enforced, and new rules should be considered where appropriate,” the senators’ letter said. “We owe it to student loan borrowers – and to taxpayers – to ensure that unscrupulous businesses are not taking advantage of the student debt crisis.

Darren Briscoe, press secretary for the Department of Education, said enforcement is beyond the scope of his agency. But Briscoe also suggested that the department could help students struggling to pay their debts.


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“The department does not have any authority over these private entities,” he said in an email to the Journal . “In the last year, the Department launched, a comprehensive site with many tools and resources available to borrowers at no cost. provides information on several repayment plans and options available to borrowers, and even provides information on avoiding scams. Additionally, the Department launched the new Financial Awareness Counseling Tool this past year on to assist borrowers with managing their debt.”

In a statement, Udall lamented that New Mexico students are taking on “record levels of debt.”

Heinrich said, “It’s disturbing to think that unscrupulous, private companies are trying to profit off student borrowers at a time when they are struggling to pay off their loans and make ends meet. New Mexico students and their parents deserve to be protected from these deceptive and unethical practices.”