Think student loan lenders and collection agencies are the only ones trying to take advantage of students? Think again.

There is a booming new industry. Dozens of companies have popped up over the past few years, claiming to offer student loan borrowers simplified loan management and reductions in their monthly payments. Sounds great, right? While some of these operations may offer legitimate assistance to borrowers, a new investigatory report issued by the Boston-based National Consumer Law Center (NCLC) describes some of the problems with these companies. The report was issued after a “secret shopper” looked into nearly a dozen of these firms. Here are some key findings:

• Companies frequently omit or misrepresent key facts about loan programs that can be critical in helping a student loan borrower understand his or her options.
• Free federal loan programs such as consolidation and Income-Based Repayment (IBR) are sometimes marketed as a company’s own in-house debt solutions. The company then charges for access to those programs.
• In addition to hefty up-front costs, companies will often charge monthly surcharges or “maintenance fees.” Sometimes, these fees will not be disclosed, or they will be buried in the fine print of dense contracts that the student loan borrower is required to sign.
• Borrowers may be pressured to give an agent of the company direct access to his or her student loan accounts, or to sign on the borrower’s behalf.
• The companies will often not disclose names and qualifications of executives, staff, or employees, making it difficult (if not impossible) for borrowers to determine the legitimacy of a particular operation.

While the NCLC report is highly critical of these companies, it also lays some of the blame on the U.S. Department of Education and its contracted loan servicers. As many of you are aware, the federal loan servicing bureaucracy is unhelpful, prone to errors, and incredibly frustrating to navigate, driving many borrowers to seek assistance elsewhere. It’s perfectly understandable that student loan borrowers want to look for assistance with managing their student loans; they just should be careful about where they look.

To read the NCLC report, click here.