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Don’t Overpay for Student Loan Consolidation

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UNITED STATES  --  For those trying to manage their student loan debt, the process may include loan consolidation.

KPLR 11's Mike Colombo explored the confusion behind "free" versus "fee" debt services.

"The first thing I noticed it says, 'dear...my first name.' Then it says your loan is up to $36,000. Well, that's not too far off, but it's not the exact number."

Scott Criscione, a 2014 Lindenwood University graduate knew something was fishy when he received a letter offering student loan consolidation and payment reduction.

"I looked at it and they want your financial student aid ID, some other IDs," he said.

So he decided to dig deeper, and his search led him to the Department of Education.

"I called DOE and said, 'hey, what is it?' The girl replied, 'we've heard that one before. It's a fake,'" said Criscione.

The loan consolidation offered by Assure Direct Services isn't really fake, but its services are not really necessary. The fine print at the bottom of the letter Scott received notes that ADS is not affiliated with the government or any of its programs. It goes on to acknowledge that the very service it charges you for can be obtained from the government for free.

"If you decide paying for help is what you want to do, that's fine, but you need to know exactly what you're getting," said Robert Farrington, founder of the website collegeinvestor.com. "Where we see a lot of borrowers get in trouble is that these companies sell something to a borrower that doesn't actually exist. They make promises they can't commit to and then the borrower ends up in trouble, but they don't realize they're in trouble until maybe six months, a year down the road after they've already paid these fees up front."

It's an issue Criscione won't have to worry about.

"Don't just trust some piece of paper in the mail you could easily throw away that's sent out to the masses," he said.

To learn more about the free option for consolidation, click here.

If you decide to pay a company to prepare and counsel you about loan consolidation, here are some tips to help. Make sure you do your homework about the counseling service; know exactly what you're paying for and what you are getting. And be careful--there are many fly-by-night companies looking to make a quick buck.