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Beware student loan repayment service scams

Posted: 10:41 AM, Feb 05, 2020
Updated: 2020-02-05 10:41:12-05

NEW YORK — Karen Morris pays all her bills on time. Unfortunately, that may not have helped in the case of her student loan.

The former college student recently received a letter from the FTC informing her it's freezing the assets of her student loan servicing company, Mission Hills Federal of San Diego.

"The Federal Trade Commission was closing them down because it was a student loan scam," she said.

The FTC claims Mission Hills took in more than $23 million from college grads like Morris, but then allegedly kept the money and failed to repay their student loans.

Now the U.S. Department of Education tells her it will take her tax return or garnish her wages to get the money she still owes.

"Now Student Loans wants to take my tax return," she said. She still owes $2,000. "And they're going to take my tax return this year."

This is not an isolated case.

Loan servicing scams and loan forgiveness scams target thousands of students every year. But there are ways to protect yourself from a shady loan company.

Nerdwallet.com says warning signs of a loan repayment scam are:

- Upfront fees to service your student loan
- Promises of loan forgiveness (it is very hard to have a loan completely forgiven)
- The company advertises on social media
- The company has a high number of complaints if you Google their name

We contacted the U.S. Department of Education to see if Morris can get any loan relief, since she has been paying her bill every month. Spokesperson Jim Bradshaw told us they are now examining her case to see if anything can be done.

We also checked with the FTC, where spokesperson Nicole Drayton said "we are mid-litigation so it is unclear yet whether we'll end up returning money to consumers, or what the outcome of our lawsuit will be."

Our calls to Mission Hills went to a generic voice mail and were not returned.

Karen Morris says it's not right that college grads who thought they were paying off their loans may now be penalized for the wrongdoing of the loan service company they trusted.

"No, it's not fair," she said. "I was doing what I was supposed to do and paying my student loans back every month. That was my agreement."

She hopes someone else honors the agreement, or she will have no tax refund this year. As always, don't waste your money.