BOSTON >> In an effort to help borrowers struggling to repay student debt, Attorney General Maura Healey on Tuesday announced a new student loan assistance unit and a crackdown on unlawful debt relief companies.
"These are so similar to some of the problems we saw and some of the practices we saw with the mortgage crisis," Healey said. "Families struggling to get by, servicers not doing their job, and scam artists stepping in to take advantage of vulnerable people."
Going after what she described as a "new cottage industry" of debt-relief companies targeting students, Healey said she has banned two such businesses from operating in Massachusetts. An investigation by her office into Irvine Webworks Inc. and Interactiv Education LLC turned up allegations of illegal upfront fees, aggressive marketing and deception of borrowers, she said.
Irvine WebWorks, which does business as Student Loan Processing.US, has agreed to pay $56,000, and Interactiv Education, which does business as Direct Student Aid, has agreed to pay $40,000 over the allegations. The money will be used to provide relief to at least 200 students harmed by the companies, Healey said, including some who were charged more than $1,000 to have the companies complete applications.
"If you are being marketed to by an entity that is suggesting they can help you with debt consolidation, debt relief — buyer beware," Healey said. "Don't go there. Any entity that is going to charge you an upfront fee for those services, they are actually violating the law. Stay away."
Such companies charge students money for services that are available for free through federal programs or nonprofits, often leading to hundreds or thousands of dollars of unnecessary payments, Healey said.
The attorney general's office has created a student loan assistance unit, Healey said, with a hotline whose staff will help callers get out of default or delinquency, apply for repayment plans, and advocate for loan discharges. The hotline number is 1-888-830-6277.
"Right now the federal government is failing," Healey said. "Loan servicers are failing. It's time for us to step in and fill that void."
The attorney general's efforts could help inject neutral information into an atmosphere dominated by radio, print, television and mobile ads promoting for-profit debt relief company, said Kevin Fudge of American Student Assistance, a nonprofit organization that helps students pay for college and manage debt.
"There's not enough of a counterbalance to that voice in the marketplace for bad actors, so it's nice to see this sort of counterweight and that other voice out there that's saying, 'Hey, look, here's a place where you can get advice," Fudge told the News Service.
Students and advocates who joined Healey in her office for the announcement also praised the new hotline as a means of providing borrowers with information they otherwise may have difficulty obtaining.
"Because access to legal advice is so hard to come by, people essentially are unable to enforce their legal rights, so their legal rights disappear," said attorney Toby Merrill, the director of Harvard Law School's Project on Predatory Student Lending.
Amelia Manni, a student in a Southern New Hampshire University master's program, said Healey's office helped her and her mother recoup $1,500 they had paid in fees to a debt relief company, thinking it was going toward the loans for her undergraduate coursework.
"We were just looking to make things easier financially," said Manni, who took classes at Emmanuel College and Boston University to earn a bachelor's degree in biology. "After four months we realized — after I called my loan company to sign up for grad school — that none of those payments were going toward my student loans, and I just hadn't been paying them for the six months after I graduated."