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FTC’s Focus on the Student Loan Relief Industry

It’s hardly a surprise that loan consolidation is a popular option for people looking to lessen the burden of their student loan debt. Too many students today graduate with too much loan debt, and many of them need help. – among others – has ways to help.

But with the increased popularity of debt services, comes the watchful eye of the Federal Trade Commission (FTC). Last week, FTC staff attorney Michelle Grajales presented an up-close compliance update to debt-service providers at the Association for Student Loan Relief Conference in Las Vegas.

Grajales said she believes there are three areas the FTC watches closely: False claims, telemarketing and credit repair services. Each area is particularly important because the FTC doesn’t want individuals or companies taking advantage of consumers looking for student debt relief.

False Claims

The first area of interest deals with preventing unfair and deceptive practices. In the past, core deception practices in debt relief involved misleading statements about a program being offered or sign-up fees.

For example, some debt relief companies falsely claim to have an affiliation with government entities, including the U.S. Department of Education. This false claim leads consumers to have more trust in the company when that trust may not be warranted.


The FTC’s second area of interest is the Telemarketing Sales Rule, particularly for those companies operating across multiple states. When it comes to student loan consolidation, it is important the company offering the service over the phone be completely transparent about what they’re doing.

Specifically, companies should make any potential customers aware that the consolidation is being completed by the Department of Education, and the service being offered is that of preparing the documentation to achieve the consolidation.

Credit Repair Organizations Act

The last area of interest involves the Credit Repair Organizations Act. The purpose of this act is to ensure that prospective buyers of credit repair services receive all the necessary information needed to make an informed decision about the transaction.

Grajales says companies sometimes make promises they can’t keep just to enroll clients. For example, companies will say they can erase negative credit marks, but in actuality, they may not.

Consumers looking for student loan consolidation should pay particular attention to what a company promises and what they actually deliver.

Private Companies Can Help with Student Debt Relief

It is important to understand that the FTC believes there is nothing wrong with private companies providing student loan debt relief services. There is a high demand for the service, after all.

In addition, Grajales said there is room for growth in the industry if student loan relief companies operate in an honorable and compliant fashion.

But companies working in this industry need to pay particular attention to the laws laid out by the FTC. What’s more, they need to comply with them.

If done properly, student loan consolidation can provide vast relief for those in need.

Robert Jordan is a Marketing Associate at As a former Student Debt Advocate he knows the difficulties of dealing with student loans. He hopes his first-hand experience can help all those in need.

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].

The Federal Trade Commission Now Reviewing Student Loan Relief Industry

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