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Focus on Regulation

Department of Education Cautions Postsecondary Institutions Regarding “Debt Relief” Companies

shutterstock_99045317On March 30 the U.S. Department of Education (“ED”) issued an Electronic Announcement asking postsecondary education institutions to protect students against misleading information from “debt relief” companies.

Earlier this year ED sent cease-and-desist orders to two “debt relief” companies that ED found to be using its official seal without authorization. In the Electronic Announcement ED noted that it was concerned about “misuse” of the seal because the companies “are charging large up-front or monthly fees for federal aid services offered by [ED] and its student loan servicers for free,” including consolidating federal student loans, changing repayment plans, resolving defaults, and filing requests for borrower defense loan cancellation. The companies’ use of ED’s logo may, ED said, inappropriately give the impression that the companies are working with or for the government.

Similarly, ED observed that companies sometimes state or imply that they are working with a postsecondary institution to provide a benefit to student loan borrowers. ED “strongly recommend[ed]” that each institution participating in federal student aid programs monitor whether “debt relief” companies are using the institution’s name, mascot, logo, trademarks, or other identifying information in an unauthorized manner. If the institution identifies such unauthorized use, ED advised the institution to consider contacting the state attorney general’s office or other state consumer protection agency or taking legal action against the company.

ED also asked institutions to help student loan borrowers understand the services that ED and its student loan servicers offer for free by:

  • Providing warnings to students about “debt relief” companies;
  • Providing information to students indicating that they do not need to pay for loan benefits for Federal student loans; and
  • Reviewing institutional websites to provide up-to-date information about the terms and conditions of Federal student loans and the servicing of such loans.

Institutions can protect students and their intellectual property by helping students understand the loan services provided by ED and monitoring unauthorized use of the institution’s name, mascot, logo, trademarks, and other identifying information. As detailed in the Electronic Announcement, additional student-facing information about Federal student loan repayment options is available from various sources, including on StudentAid.gov/repay; in video messages on YouTube (here and here); and in blog posts from ED’s Ombudsman and ED’s Under Secretary of Education. In addition, a December 2014 consumer advisory from the Consumer Financial Protection Bureau identified warning signs of “debt relief” companies that student loan borrowers are advised to avoid.