Whenever there are large loans, there are bound to be targets for debt settlement companies. These are companies that tell borrowers that they will negotiate lower monthly fees for the borrower in exchange for a hefty upfront fee. They convince borrowers to pay them hundreds, if not thousands, of dollars, then they leave the borrowers with the same debt they had to begin with. One such company, Broadsword Student Advantage of Carrollton, Texas, has a radio advertisement which claims “Your entire student loan can be forgiven.” In the past, these fraudulent companies targeted those with large credit card debt or mortgage loans. The recent economic downturn left those who owed more on their property than it was worth as prime targets for those companies, but now they have a new group of targets.
The amount that Americans currently owe in student loans has exceeded $1 trillion, and to make matters worse, a record number of college graduates entered the workforce just as the economy was taking a nosedive, resulting in high unemployment and underemployment rates. More than half of recent graduates are either unemployed or are working low-paying jobs that don’t require the expensive college degrees that they are still struggling to pay off. An estimated seven million Americans have already defaulted on a total of $100 billion in loans, with tens of thousands of more borrowers defaulting each month.
Illinois is now expected to become the first state to bring legal action against debt settlement companies in connection with student loans. The action consists of two separate lawsuits, one against Broadsword Student Advantage and one against First American Tax Defense, alleging that both companies convinced vulnerable borrowers to pay hundreds of dollars for services that the companies never provided. In the case of Broadsword, the company allegedly continued to charge borrowers $49.99 each month after they had paid an initial fee. Continue reading