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Student loan borrowers preyed on by debt relief agencies

Many Kentucky residents who are overwhelmed by their student loan debts are often tempted to turn to debt relief agencies for help. However, state attorney generals are now suing many of these agencies for unlawful business practices. In early May, five debt relief agencies were sued by the attorney general of Illinois for breaking state laws.

The five companies that are under fire in Illinois for preying on debt-burdened students include Consumer Financial Resources LLC, Federal Student Loan Alliance, Interactiv Education LLC, Student Consulting Group Inc. and Nationwide Student Aid LLC. According to the Illinois attorney general, the companies required their clients to pay upfront fees for debt relief services, a practice that is not legal in Illinois. The fees, which sometimes cost debtors up to $1,250, were not applied to the clients' debts.

To help overwhelmed borrowers, the Illinois attorney general set up a free help line for people with student loan debt issues. According to a spokesperson for a student organization in Washington, D.C., there are many no-cost debt relief options for people with student loan obligations. Although these free helplines are available, they can be confusing for debtors, and it is sometimes unclear what training phone-based student loan counselors receive before offering advice.

Those who have more student loan debt than they can afford to pay back might want to talk to a lawyer about what options they have. A lawyer may be able to help a debtor to understand whether any of their debts are eligible for discharge or deferment. Despite popular belief, some types of student loan debts may be eligible for discharge through the bankruptcy process.

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