Shaheen Introduces Bipartisan Legislation to Stop Student Debt Relief Scams

April 11, 2019

** Bipartisan Reform Provides More Tools to Identify and Shut Down Fraudsters who Hurt Borrowers **

(WASHINGTON, D.C.) – Today, U.S. Senator Jeanne Shaheen introduced the bipartisan Stop Student Debt Relief Scams Act – legislation that would enhance efforts to identify and shut down student debt relief scams – with Senators Tammy Baldwin (D-WI), Mike Braun (R-IN) and Deb Fischer (R-NE).

“The growing size of the U.S. national student debt, now exceeding 1.5 trillion dollars, makes borrowers more vulnerable to dangerous scams that offer false promises of debt relief.  We must protect students from being scammed and defrauded,” said Shaheen. “I’m glad to work on this bipartisan legislation with Senators Baldwin, Braun and Fisher to hold criminals accountable for behavior that misleads and deceives students. I’ll keep working across the aisle to ensure accountability and prevent students from falling victims to these schemes.”

With Americans facing nearly $1.5 trillion in student loan debt, borrowers are looking for relief wherever they can find it. Debt relief scams falsely promise borrowers a quick fix with little hassle. These schemes robocall student loan borrowers until they agree to pay thousands of dollars in unnecessary fees for services that are available for free, claiming to reduce or forgive borrowers’ student debt.

In a March 2018 report, the U.S. Department of Education’s Office of Inspector General recommended that Congress strengthen federal law to help stop scam artists that fraudulently obtain access to borrower’s online login credentials, primarily by imposing meaningful financial penalties and prosecuting individuals and entities perpetrating these scams. The Stop Student Debt Relief Scams Act would accelerate the end to this rampant misconduct.

The Stop Student Debt Relief Scams Act of 2019 will enhance law enforcement and administrative abilities to identify and shut down student debt relief scams. Specifically, the legislation will:

  • Clarify that it is a federal crime to access U.S. Department of Education information technology systems for fraud, commercial advantage, or private financial gain, and impose fines on scammers for violations of the law;
  • Direct the U.S. Department of Education to create a new form of third-party access, akin to the current “preparer” function on the Free Application for Student Aid (FAFSA) for those applying on behalf of a student and their family, in order to protect legitimate organizations;
  • Require the U.S. Department of Education to maintain common-sense reporting, detection, and prevention activities to stop potential or known debt relief scams; and
  • Require student loan exit counseling to warn federal loan borrowers about debt relief scams.

This bill is endorsed by the Education Finance Council, Generation Progress, National Consumer Law Center, National Council of Higher Education Resources, Student Loan Servicing Alliance, The Institute for College Access and Success, and Young Invincibles.

“This legislation is a prime example of a smart, bipartisan effort to address a real and practical problem with real consequences for borrowers.  Stopping these predatory so-called “debt relief” scammers who charge borrowers for assistance that their actual student loan servicer already provides - that’s something we should all agree on,” said Scott Buchanan, Executive Director of the Student Loan Servicing Alliance. “As those on the front lines of helping educate student loan borrowers to be able to make good choices amongst complicated options, we support this legislation’s goal of taking more steps to protect borrowers from scammers who do nothing other than prey on those who need the very help that real servicers already provide.” 

“Education Finance Council’s (EFC) nonprofit member organizations are dedicated to assisting borrowers with managing their student loan debt and have seen first-hand the havoc that fraudulent debt relief companies can wreak on borrowers’ lives,” said Debra J. Chromy, President of the Education Finance Council. “It is critical to hold accountable such companies that are taking advantage of vulnerable borrowers for their own financial gain. We applaud Senators Baldwin, Braun, Fischer, and Shaheen for their leadership on addressing this critical issue.”

“The National Council of Higher Education Resources (NCHER) strongly supports the ‘Stop Student Debt Relief Scams Act of 2019,’ which will crack down on unlawful and unscrupulous third-party debt relief companies that target struggling borrowers and drive them deeper into debt. This important bill will protect students and families, allowing borrowers that are delinquent on their payments or in default to receive the specialized help that they need from their federal student loan servicers – for free. NCHER and its members are proud to endorse this important piece of legislation and work for its passage during the 116th Congress,” said NCHER President James Bergeron.

Senator Shaheen previously led bipartisan legislation with former Senator Orrin Hatch (R-UT) that would curb climbing student loan debt by improving the federal standard by which colleges are eligible for federal assistance and holding schools accountable for their students’ ability to repay their loans. Last month, Shaheen helped reintroduce the Bank on Students Emergency Loan Refinancing Act, which would allow borrowers refinance student loans at lower rates. As the lead Democrat of the Appropriations Subcommittee responsible for funding the Department of Education, Shaheen has fought to support programs that invest in higher education.

More information about this legislation is available here. The full bill text is available here.