KSDK -- The average college student graduates with $38,000 in debt from student loans, so it's no wonder new companies are now promising help with those loans by reducing or even getting rid of them.
But the 5 On Your Side Investigates team found that the "help" may just be a scam.
Three years ago, Hilary Fields of O'Fallon, Missouri, graduated with a nursing degree and the future seemed limitless.
Except for one thing: Her schooling came at a price — a mountain of debt in the form of student loans.
"My loan totaled $86,000," said Fields. "I was paying $1,000 a month. I didn't have any savings."
But then came a letter in the mail promising a rescue.
"It said it was from the Department of Education," said Fields."They said I would be relieved of $25,000."
The only catch? She had to pay a monthly fee of $500 and ignore all calls from her student loan company because 'they' would take care of that.
"So I figured wow....That would be the best thing ever," said Fields.
But as it turns out, it wasn't because that letter wasn't from the Department of Education, but a private "company" that supposedly specialized in student loan debt relief.
It's part of a booming underground industry that takes advantage of college graduates, leaving them nothing but more debt.
"We're seeing companies popping up saying they can help you with your student loan debt," said Chris Thetford, Vice President of communications with the St. Louis Better Business Bureau. "You think they're passing the payments along to whoever you owe the student loan money to, when they don't do that."
And he said that by the time you realize there's a problem, the company you're dealing with closes down.
The best deal he's seen, is where these companies at least send info on how to consolidate your
loans.
The problem? That information is free from the government.
"You should never pay for information about how to pay your student loans," said Lisa Madigan, Illinois Attorney General. Madigan's office issued their own tips for dealing with debt relief companies.
Madigan has filed eight lawsuits against as many 'student loan debt scam companies'.
As for Fields? Six months after signing on with a student loan debt relief company, she says the loan was in default and turned over to a debt collector.
And she had paid the debt relief company $3000 in fees.
"We were getting phone calls from debt collectors. We were scared," said Fields.
But to the rescue? Fields grandparents, who took out a home equity line of credit.
"We had to front $50,000 to get it out of the debt collectors hands," said Fields.
The lesson? Thetford said be skeptical of companies wanting upfront fees.
"You don't want to compound that pressure by spending money that could go towards your student loan debt,
on a company that ultimately might not be successful in doing anything for you that you couldn't do yourself," said Thetford.
Its something Field's said she learned the hard way.
"I was extremely vulnerable at the time. In over my head with m y loan payments at the time. I was an easy target," said Fields.
"It’s very attractive to think, ‘Wow there’s a way, if I do this, I can get out of it’. The truth is, take a deep breath, you’re obligated to pay that student loan debt unless you meet some very specific criteria that will allow you to negotiate the loan, find some way to have the loan forgiven or take some employment that include a provision that will help you pay for those loans," said Thetford.
Fields will be done paying off her student loans this May.
Statistics show, one fourth of the American workforce may be eligible for student loan forgiveness programs. For more resources on repayment or consolidation, visit https://studentloans.gov
According to USA Today, there are several circumstances that may allow for full or partial student loan forgiveness:
1. Become a public school teacher in a low-income area.
Thanks to the government's Teacher Forgiveness Program, up to $17,500 of your federal Stafford loans or the entirety of your Perkins loans can be forgiven in exchange for five consecutive, full-time years as a teacher at certain low-income elementary or secondary schools.
2. Join the military.
From the Army to the National Guard, each branch of the military has its own student loan forgiveness program. Forgiven loan amounts usually depend on the level of rank achieved. Those interested should contact their preferred branch to learn about their options, Mayotte suggested.
3. Apply for the Income-Based Repayment Plan.
Just about everyone should consider applying for the Income-Based Repayment Plan, Mayotte says. The program adjusts students' monthly loan payments to be no more than 15% of their "discretionary" income (the amount of money they make that falls above the federal poverty level).
Take, for example, a recent grad who makes $20,000. Because the federal income level within the contiguous United States is $11,490, that means he only makes $8,510 in discretionary income. Under the IBR, he would only have to make payments that were 15% of that $8,510, which equals about $106 a month.
It's entirely possible, Maylotte says, that some recent graduates make so little that they qualify to make $0 payments.
After 25 years of making these adjusted loan payments, the borrower's remaining balance is completely forgiven.
4. Get a public service, government or non-profit job.
Those who borrowed money under the William D. Ford Federal Direct Loan program can apply to the Public Service Loan Forgiveness Program. In this program, full-time employees in the public service or non-profit sector can have the remainder of their outstanding debt forgiven after they successfully make 120 qualified loan payments.
What kinds of jobs qualify as public service? "Any employment with a federal, state or local government agency, entity, or organization or a not-for-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC)," according to the U.S. Office of Education's federal student aid website.
Some 501(c)(3) organizations that pay taxes are still included in the program, however, if they fall under a specified list of public services such as early-childhood education or public-interest law services.