AG files suit against student loan company

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FRANKFORT, Ky. (WTVQ) – The Attorney General has filed a lawsuit against an out-of-state student loan company for failing to turn over key documents to his office.

Liberty Tax and Student Loan Defense, based out of Florida, failed to fully respond to a subpoena issued by Beshear’s Office of Consumer Protection. The Attorney General’s office has an ongoing investigation into the company’s potentially misleading college loan forgiveness claims aimed at Kentucky consumers for large fees.

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Students with debt can obtain free loan consolidation, forgiveness and other loan services directly from their federal loan providers.

The Office of the Attorney General issued a Subpoena and Investigative Demand (SID) on Liberty and its officers last summer.

The lawsuit, filed in Franklin Circuit Court this week, seeks an injunction to prevent Liberty, also doing business as Freedom Student and Tax Defense LLC, from operating in Kentucky and soliciting Kentucky consumers. It also seeks to ban the company from collecting or attempting to collect payment from Kentucky consumers.

Additionally, Liberty allegedly claims it is working with the federal government to offer debt relief services and has collected fees from Kentuckians without providing any debt relief services, according to the lawsuit.

There are several warning signs students should look for when receiving calls about debt relief:

  • Beware if a student loan debt relief company contacts you with a high-pressure sales pitch and demands that you sign a contract and pay for services or fees up front, or asks for your personal information or financial account information.
  • Beware if these companies make promises of immediate loan forgiveness, debt cancellation or complete forgiveness after a certain number of payments. Debt relief companies do not have the ability to negotiate with your creditors for “special loan forgiveness” under the federal student loan programs currently in place.
  • Beware if the student debt relief companies ask you to provide your Federal Student Aid PIN number. Your PIN is an ID number issued by the U.S. Department of Education to allow you access to information about your federal student loans and should be kept private.
  • Beware if the company asks you to sign a “power of attorney” or a “third party authorization.” These are written agreements signed by you and the parties giving them legal permission to talk directly to your student loan servicer and make decisions on your behalf.

If students have questions or concerns about repaying student loans, they should contact their service provider directly to discuss repayment options by calling Federal Student Aid at 800-433-3243 or email them.

If students have problems with their student loan servicer or debt collector, they can contact the following agencies for assistance:

If students feel that they have been the victim of a student loan debt relief scam, they can submit a complaint to the Attorney General’s office or call 502-696-5300. The AG’s Consumer Protection Office will contact students at the number provided to discuss a complaint and assist them in resolving their concerns.