ST. PAUL -- Minnesota’s attorney general is accusing a Florida company of preying on student borrowers with promises of loan forgiveness, according to a consumer protection lawsuit filed Wednesday in Hennepin County.
Doral, Fla.-based Student Aid Center Inc. has charged more than 800 Minnesota borrowers as much as $1,500 apiece to have their federal student loans “forgiven” - when the company is actually just enrolling them in a repayment or consolidation program, Attorney General Lori Swanson’s complaint alleges.
Eligible borrowers can apply for the same repayment plans and consolidation loans themselves free of charge through the federal government.
ADVERTISEMENT
“The bait was, ‘We can make your loans be forgiven,’ ” Swanson said. “The switch was that what they were doing - at best - was signing people up for these repayment plans and consolidation loans.”
Student Aid Center did not respond to a request for comment Wednesday.
According to Swanson’s complaint, the company told borrowers it would “take over” their student loans in exchange for a set number of monthly payments to the company, or help them qualify for loan forgiveness programs.
When borrowers stopped making payments on these loans, some went into default.
Shallyn Slack, an elementary school teacher in Owatonna, said she believed her $65,000 in student loan debt would be forgiven after she paid Student Aid Center $1,000. Instead, she received a default notice from her loan servicer.
“It looked so real to me,” she said of Student Aid Center’s pitch. “I feel very used. And I still have the debt.”
Swanson’s lawsuit also alleges Student Aid Center solicited confidential account information from borrowers and submitted fraudulent power of attorney documents to loan servicers.
While there are a handful of student loan forgiveness programs available to people who enter certain professions, such as teaching and public service, only the federal government can determine whether a borrower is eligible.
ADVERTISEMENT
It is legal to charge for debt settlement services in Minnesota, but companies that do so must be licensed by the state and adhere to a set of regulations. Student Aid Center is not licensed to provide such services, Swanson said.
“Students don’t have to pay money to these companies,” Swanson said. “Don’t pay $1,000 for something you can do on your own for free.”
