Education

FTC issuing refunds to scammed student loan borrowers

Thousands of student loan borrowers are set to receive checks from the federal government after being victimized by a loan scam.

The exterior of the Federal Trade Commission building.
Alex Brandon / AP
SMS

After a yearslong fight between the government and student loan debt relief scammers, the Federal Trade Commission said it is processing over $4 million in refunds to student loan borrowers. 

According to the FTC, 27,584 consumers will receive a portion of the payout. The FTC said Mission Hills Federal and Federal Direct Group "tricked students into paying hundreds to thousands of dollars in illegal upfront fees and pretended to lower consumers’ monthly student loan payments." 

The FTC also alleged that borrowers would send student loan payments through them, but the company often pocketed the payments without applying them toward loans. 

Those receiving payments should get them within 90 days, the FTC said. 

Student loan borrowers facing hardships could have debt forgiven
Student loan borrowers facing hardships could have debt forgiven

Student loan borrowers facing hardships could have debt forgiven

The Biden administration is considering a new rule that would forgive federal student loans for borrowers who face a high risk of default.

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The payout comes four years after a federal court sided with the FTC and ordered the companies to stop providing any student debt assistance. The court also imposed a $27.6 million judgment against the companies. 

"Despite their promises, they did not use the money they collected from their customers to pay down student loan balances and did not get student loan balances forgiven," the FTC said. "As a result of the lawsuit, the defendants paid money to provide refunds and are banned from telemarketing and debt relief services."

The FTC has published tips to avoid student loan relief scams. Among the tips, the FTC says it is illegal for companies to charge you before they help you.