Posted by: cslfconnects | September 30, 2008

Avoiding Student Loan Scams

Integrity in lending…at CSLF we believe that getting money for college is challenging enough without families and students worrying about being vulnerable to questionable lending practices.

Quite some time ago, CSLF officially adopted Student Loan Business Practices, endorsed by the Education Finance Council (EFC), and the National Council for Higher Education Loan Programs (NCHELP).  What does this mean? It means that outside of and ahead of any official governing body (such as the Department of Education, or the Federal Trade Commission) we took a stand against questionable lending practices.

CSLF committed officially to the EFC/NCHELP business practices with other lenders in the Federal Family Education Loan program, standing shoulder to shoulder with those who care about borrowers and how business is done in our industry. We’re proud that we’ve always embodied these values.  As a non-profit entity, we don’t answer to shareholders – we don’t have any.  And that navigates CSLF’s course in a very different direction.

Before the official adoption of these standards or any guides published by the FTC, we fielded many calls from consumers seeking guidance:

“Is this an official letter from the Department of Education? It has this fancy seal on it and it looks important….”
“Is it really a good idea to consolidate my Perkins loan? Another company told me I should….”
“Hey, is this other company’s loan a good deal? They’re throwing in an iPod….”
“Well, if I borrow from this other company, they don’t report this private loan to the school, and I can borrow as much as I want….”

We have been helping borrowers spot these questionable business practices all along. These issues and others are mentioned in the jointly published (by the FTC and Department of Education) “Facts for Consumers: Avoiding Deceptive Offers” [see below].

Here’s a road-map for integrity in lending, the very useful guide from the FTC/Dept of Education.  Lastly, please don’t forget: minimize the amount you borrow, and always maximize your Federal, State, scholarship and work-study aid and Federal Loans before considering a private loan.

For more information and assistance on college planning and student loans, please visit us on the web at and for discussions for parent and student borrowers, please join us on Facebook:

CSLF On Facebook:

We invite our friends (student and parent borrowers as well as financial aid professionals) to post comments and ask questions in our Facebook groups, also. Find our groups at:

Student Loan Business Practices

Endorsed by Education Finance Council (EFC) and National Council for Higher Education Loan Programs (NCHELP)

Participants in the Federal Family Education Loan Program (the “FFELP”) are committed to the highest ethical standards in helping students and families pursuing postsecondary education. In furtherance of this commitment, members of the Education Finance Council and the National Council of Higher Education Loan Programs endorse the following principles:

1. The goal of a FFELP participant shall be to help students receive in an accurate and timely manner the loans for which they qualify.

2. FFELP participants shall encourage students and families to borrow only what they absolutely need to persist and succeed in postsecondary education.

3. FFELP participants shall respect the role of student financial aid professionals, and support the integrity of the financial aid process and the financial aid professionals’ responsibility to assist their students.

4. FFELP participants shall work with student financial aid professionals, elementary and secondary school counselors and others to promote increased awareness of financial aid opportunities, to enhance access to postsecondary education, and to increase financial literacy.

5. FFELP participants shall fairly and accurately disclose all terms and conditions related to their loan products to students and families.

6. FFELP participants shall plainly disclose all eligibility conditions that apply to borrower benefit programs, including but not limited to situations that could cause withdrawal and/or refunding of the benefits or cessation of the program.

7. FFELP participants shall protect the privacy of loan applicants and recipients and shall comply with all applicable federal and state laws that restrict the use of the nonpublic personal information for purposes unrelated to the processing and administration of the consumer’s loans, including honoring borrower requests pursuant to those provisions. In addition, FFELP participants shall ensure their contractors/servicers protect the same privacy.

8. FFELP participants shall refrain from taking action which would cause a school employee to have a conflict of interest. Without limiting the foregoing, FFELP participants should not offer gifts, meals or tickets to entertainment events to school employee(s) if the value of such would create the appearance of impropriety on the part of the school employee.

9. FFELP participants shall maintain programs that continue to fully comply with the anti-inducement provisions contained in the Higher Education Act and the implementing guidelines issued by the Department of Education. In furtherance of the objectives of those provisions, FFELP participants are encouraged to follow the “Guidelines for FFELP Industry Practices” endorsed in 2004 by Consumer Bankers Association, Education Finance Council and National Council of Higher Education Loan Programs.  ~  April 2007

FTC Issues Consumer Guide on Deceptive Student-Loan Marketing

From the Chronicle of Higher Education
News Blog ~ Higher education news
from around the world

June 25, 2008

Washington — The Federal Trade Commission, under pressure from Congress to step up its scrutiny of the largely unregulated market in private student loans, has released a consumer guide to deceptive marketing.

The guide, which was jointly issued with the Department of Education, offers students advice on how to spot deceptive marketing and tips on how to navigate the loan-consolidation market. It also provides information on how to file a complaint against a lender.

Rep. George Miller, the Democrat of California who is chairman of the education committee in the U.S. House of Representatives, said the guide would “help students steer clear of manipulative or shady loan offers.”

“For too long, students have had virtually no protection from the confusing, misleading, and even predatory marketing materials used by many private lenders,” Representative Miller said.

Last year his committee passed a bill to renew the Higher Education Act that would require private lenders to provide borrowers with multiple disclosures about terms and conditions, and notify them that they may qualify for lower-cost federal loans.

The bill, which is being reconciled with the Senate’s version, would also require private lenders to obtain from a borrower’s college certification of his or her enrollment status and cost of attendance before issuing any loan funds. —Kelly Field

Posted on Wednesday June 25, 2008
Student Loans: Avoiding Deceptive Offers

June 2008

A joint publication of the Federal Trade Commission and the U.S. Department of Education

An education beyond high school is an investment in your future. It can be expensive and often requires you or your family to take out loans to help pay for it.

Student loans fall into two categories, federal loans and private loans.

  • Federal loans, which are subject to oversight and regulation by the federal government, include:

o Direct Loans, where the U.S. Department of Education is the lender;

o Federal Family Education Loans (FFEL), where private lenders make loans backed by the federal government and
o Federal Perkins Loans.

  • Private loans, sometimes referenced as “alternative loans,” are offered by private lenders and do not include the benefits and protections available with federal loans.

Whether you’re taking out a new student loan or consolidating existing education loans, the Federal Trade Commission (FTC), the nation’s consumer protection agency, and the U.S. Department of Education (ED), the agency that oversees federal student loans, want you to know how to spot potentially deceptive claims or business practices some private companies may use to get your loan business.

Private Loans

Private companies may offer you loans and other forms of financial assistance for your education. They often use direct mail marketing, telemarketing, television, radio, and online advertising to promote their products.

Paying for your education is a serious long-term financial obligation; that’s why comparing the costs of different ways of financing your education is so important. Private loans tend to have higher fees and interest rates than federal government loans. Private loans also do not offer the opportunities for cancellation or loan forgiveness that are available on many federal loan programs. So it makes good financial sense to exhaust your federal loan options (as well as grants and scholarships) before considering loans from any private companies. To learn more about federal government loans, visit

Spotting Deceptive Private Student Loan Practices

If you are considering a private student loan, it’s important to know whom you’re doing business with and the terms of the loan. The FTC and ED offer these tips to help you recognize questionable claims and practices related to private student loans.

  • Some private lenders and their marketers use names, seals, logos, or other representations similar to those of government agencies to create the false or misleading impression that they are part of or affiliated with the federal government and its student loan programs. ED does not send advertisements or mailers, or otherwise solicit consumers to borrow money. If you receive a student loan solicitation, it is not from ED.
  • Don’t let promotions or incentives like gift cards, credit cards, and sweepstakes prizes divert you from assessing whether the key terms of the loan are reasonable.
  • Don’t give out personal information on the phone, through the mail, or over the Internet unless you know with whom you are dealing. Private student lenders typically ask for your student account number — often your Social Security number (SSN) or Personal Identification Number (PIN) — saying they need it to help determine your eligibility. However, because scam artists who purport to be private student lenders can misuse this information, it is critical to provide it or other personal information only if you have confidence in the private student lender with whom you are dealing.
  • Check out the track record of particular private student lenders with your state Attorney General (, your local consumer protection agency (, and the Better Business Bureau (

Special Considerations for Consolidation of Federal Loans

Student loan consolidation is combining several loans into one with a new repayment term and interest rate. This is generally offered in connection with federal loans. Here’s how to help identify potential problems related to loan consolidation:

  • Avoid lenders and marketers who use high-pressure sales tactics. Some marketers pitch that “your interest rates may go up if you do not consolidate immediately!” Whether and when interest rates for consolidating your loans will change depends on what type of loans you have. Look at your loan documents to determine whether the interest rates are fixed or variable:
    • If all of your education loans have fixed interest rates, there may be no deadline to consolidate.
    • If some or all of your loans have variable interest rates, when you consolidate into a fixed loan it may affect the interest rate of your loan. ED publishes new variable rates for some federal loans each July 1st. The annual rate changes can raise or lower the interest rate offered on a consolidated loan because the consolidation interest rate will be the weighted average of all loans consolidated.
  • Whether or not you have a targeted timeframe, take your time to determine whether consolidating is right for you.
  • Some lenders impose restrictions on promised discounts. Some may disclose these limits only in the fine print. Read the fine print in your loan documents to find these types of conditions:
  • Some lenders lower the interest rate on your consolidated loan, but only if you opt for automated payments from your checking account.
  • Other lenders discount the interest rate on your consolidated loan, but only if your loan has at least a specified minimum loan balance.

Still others agree to lower the interest rate on your consolidated loan, but only if you remain current on your payments for the life of the loan. You may want to consider loans with more immediate discounts, a shorter on-time payment period for interest rate discounts, or an additional discount for signing up for automatic payments.

  • Some lenders sell consolidated loans to other companies. Because benefits of consolidated loans — like promised discounts — may not transfer, you may lose benefits if the lender sells your loan. Ask the lender whether the terms of your loan will change if it is sold.
  • Be cautious about consolidating federal loans and private loans into one private loan. The result of consolidating all loans into one non-federal private loan means that you lose all the benefits and protections provided in the federal loan programs.
  • Consolidating a Perkins loan may not be in your best interest. You may lose unique deferment and cancellation rights available to Perkins loan borrowers. For more information about these rights go to
  • Frequent consolidation after borrowing may impact timelines you need to meet to qualify for these benefits.

For More Information or to File a Complaint:

To learn about federal student loans, write the U.S. Department of Education at:
U.S. Department of Education
Federal Student Aid Information Center
P.O. Box 84
Washington, DC 20044-0084
800-4-FED-AID (TTY: 800-730-8913)

Notify the Federal Student Aid Ombudsman at 1-877-557-2575 or if you have a complaint that you cannot resolve with your lender.

For questions about a particular lender, contact the federal agency with jurisdiction over that lender:

Office of the Comptroller of the Currency
Regulates banks with “national” in the name or “N.A.” after the name:
Office of the Ombudsman
Customer Assistance Group
1301 McKinney Street, Suite 3450
Houston, TX 77010
800-613-6743 toll-free

Board of Governors of the Federal Reserve System
Regulates state-chartered banks that are members of the Federal Reserve System, bank holding companies, and branches of foreign banks:
Federal Reserve Consumer Help PO Box 1200
Minneapolis, MN 55480
888-851-1920 (TTY: 877-766-8533) toll-free

Federal Deposit Insurance Corporation
Regulates state-chartered banks that are not members of the Federal Reserve System:
Division of Supervision & Consumer Protection
550 17th Street, NW
Washington, DC 20429
877-ASK-FDIC (275-3342) toll-free

National Credit Union Administration
Regulates federally chartered credit unions:
Office of Public and Congressional Affairs
1775 Duke Street
Alexandria, VA 22314-3428

Office of Thrift Supervision
Regulates federal savings and loan associations and federal savings banks:
Consumer Programs
1700 G Street, NW
Washington, DC 20552
800-842-6929 toll-free

Federal Trade Commission
Regulates non-bank lenders:
Consumer Response Center
600 Pennsylvania Avenue, NW
Washington, DC 20580
877-FTC-HELP (382-4357) toll-free

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

Federal Student Aid, an office of the U.S. Department of Education, administers the federal student financial aid — grants, loans, and work-study programs — available for education beyond high school. Federal Student Aid interacts with postsecondary schools, financial institutions and other participants in the student aid programs to deliver services that help students and families plan and pay for college.

To learn more about Federal Student Aid and how to pay for college, visit or call call 1-800-4-FED-AID.
The Federal Student Aid Ombudsman is available to individuals with specific complaints. To learn more about the Ombudsman, visit or call 1-877-557-2575.

June 2008


Fair Use Notice: This web site contains some copyrighted material whose use has not been authorized by the copyright owners. We believe that this not-for-profit, educational use on the Web constitutes a fair use of the copyrighted material (as provided for in section 107 of the US Copyright Law.)

Mingle with us on MySpace where you can become a friend of “The Loan Geek,” Mariana Evica of CSLF.

Find us on Facebook! (You must be a signed in member of Facebook to access this page.)

See you there!


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: