The Federal Trade Commission revealed this week that it would reimburse student loan borrowers who lost money in a debt-relief scam thousands of cheques totalling more than $822,000 in total.
According to the FTC, checks will be sent to more than 14,500 customers who paid money to a business that went by the name of Student Advocates. These customers must deposit their checks within 90 days of receiving them.
In September 2019, the FTC filed a complaint against Student Advocates, stating that the business had misled borrowers about the use of their money for their loans and had imposed illegal upfront fees. Additionally, customers were misled into taking out high-interest loans and given false promises of lower payments and, in some cases, debt forgiveness.
“None of the money collected by the defendants was paid toward consumers’ student loans,” in a statement on Thursday, the FTC stated.
An inquiry for comment sent by CNBC via LinkedIn was not answered by representatives of Student Advocates.
Red flags include upfront costs and claims of “immediate” outcomes
The entire outstanding loan sum in the United States is more than $1.7 trillion, and there are more than 44 million borrowers. With many debtors owing $100,000 or more, the average student loan balance is now approximately $30,000, up from $10,000 in the early 1990s. Problems with repayment are frequent.
Consumer advocates claim that scammers will use this as an opportunity to pull a scam.

More and more often, con artists promise debtors student loan forgiveness and reduced payments. Consumer activists claim that they frequently demand advance payments of up to thousands of dollars for this “service,” which is against the law.
“The Credit Repair Organizations Act of 1996 bans charging upfront fees for credit repair, such as student loan forgiveness, student loan consolidation and switching repayment plans,” Mark Kantrowitz, a higher education expert, stated.
Never share your federal student ID with anyone but your servicer or the government, according to Kantrowitz.
Be skeptical of claims that your student loan debt would be “immediate” cancelled, he added.
“As we all know, loan forgiveness is not that quick of a process,” citing one of the most well-liked and genuine programs, Kantrowitz added. “Public Service Loan Forgiveness takes 10 years.”
Look for trustworthy sources of assistance with student loans
Advocates claim that these con artists frequently promise services that may be completed online by the victim in less than 30 minutes.
For instance, if you’re having trouble making your student loan payments, your servicer may be able to transfer you to an income-driven repayment plan.
Your monthly expenses will be limited by the program to a certain percentage of your income. Deferments for unemployment and financial hardship are also available. On the Education Department’s StudentAid.gov website, you can request various sorts of assistance for nothing.
And keep in mind that most federal student loan borrowers are exempt from making payments until at least the end of August thanks to the pandemic-era regulation, which has been in effect since March 2022.
Consumers who get a check from the FTC and have inquiries regarding their refund can contact JND Legal Administration by calling 877-540-0989, according to the agency.