The federal Consumer Financial Protection Bureau has sued Global Financial Support Inc., alleging that it deceptively markets and charges for financial aid services that students and families could otherwise get for free.
In a complaint filed Oct. 29, the CFPB says that since 2011, Global Financial Support Inc., through its subsidiaries Student Financial Resource Center and College Financial Advisory, has sent letters to students requesting a fee for access to federal financial aid.
The letters, which appear to have come from the government or universities, include applications for personalized financial aid advice and promise access to need-based support for a fee of $59 to $78, the CFPB says. But students and families can only receive federal financial aid by filling out the government’s Free Application for Federal Student Aid, and the form is always free to submit.
“Student Financial Resource Center and College Financial Advisory scammed thousands of students by masquerading as government agencies and other trusted organizations,” Richard Cordray, director of the CFPB, said in a statement. “Students and families were looking for information on how to pay for college; instead, they were illegally charged millions of dollars for sham financial services.”
“Students and families were looking for information on how to pay for college; instead, they were illegally charged millions of dollars for sham financial services.”
— Richard Cordray, director, Consumer Financial Protection Bureau
Not only did the companies charge for a free service, but they also failed to deliver on their offers for individual financial aid advice, according to the CFPB. (NerdWallet CEO Tim Chen is on the bureau’s Consumer Advisory Board.) Some consumers received a generic packet of information, according to the CFPB, while others got nothing in return.
The CFPB has requested that the company stop its practices nationally, pay penalties to the government and reimburse consumers who paid for its services. On Oct. 15, Iowa Attorney General Tom Miller came to a similar agreement with the company, which applies only to Iowa residents.
Global Financial Support did not immediately respond to an email request for comment. The company denied wrongdoing as part of its agreement with Iowa.
Use these free resources instead
Financial aid help doesn’t have to cost you a thing. These free resources will help you pick a college that won’t leave you with overwhelming debt; guide you and your family as you fill out the FAFSA; and help you understand your financial aid package and make the most informed college financing decision.
U.S. Department of Education’s College Scorecard
Get a sense for what colleges are a good financial fit for you with the government’s updated College Scorecard. It lists colleges’ average annual cost, students’ average salary after graduation and typical student loan debt load. Use the tool to research colleges so you get a realistic view of how much your degree might cost, and what it will be worth, before you even apply.
NerdWallet’s FAFSA resources
Once you’ve applied to colleges, the next step is to fill out the FAFSA. It’s available to students and families at fafsa.ed.gov between Jan. 1 and June 30 each year, but the earlier you fill it out, the better. (Starting in 2016 for the 2017-18 school year, the FAFSA will be available earlier — in October instead of January.) Complete it each year you’re in school in order to be considered for federal financial aid, including student loans, grants and scholarships.
NerdWallet has three resources you can use to make the FAFSA process a little easier, especially the first time you do it as a graduating high school senior.
- FAFSA tutorial: Annotated explanations for each question that you can refer to while you fill out the form. The tutorial also offers a checklist of paperwork you should gather in advance.
- FAFSA guide: Tips for completing the FAFSA according to your specific family situation. It’s especially helpful if you have a nontraditional family, if you’re not financially dependent on one or both of your parents or if your immigration status is a factor.
- FAFSA FAQ: Answers to common FAFSA questions, which you can browse in case you have concerns that aren’t addressed in the guide or tutorial.
CFPB’s financial aid comparison tool
Each college that accepts you will send you a financial aid package, which lists the school’s cost of attendance and how it recommends you pay for it based on the results of your FAFSA. The letter might make it look like the school is covering the total cost, but in fact it includes suggested federal and private loan amounts in your financial aid “award.”
The CFPB’s tool lets you compare financial aid offers from three schools at a time. You can see how much you’ll actually have left to pay after taking into account grants, scholarships and loans, and what your total and monthly student loan debt burden will be when you graduate. It’s also integrated with the College Scorecard, so you can compare each school’s average graduation rate and the median amount of loans families borrow.
The bottom line
The CFPB’s lawsuit echoes recent suits brought against student loan debt relief companies, which charge borrowers to consolidate their federal loans or switch repayment plans. The government will provide both services at no charge, much like the FAFSA. NerdWallet’s resources can help you learn what student loan scams are and figure out how to spot them.
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