Shallyn Slack was desperate to pay down roughly $65,000 in student loans as she sat in front of her computer screen two years ago.
The Owatonna teacher noticed an online ad that promised to rid customers of their college debt in exchange for a fee. She paid $1,000 to Student Aid Center Inc., but said she ended up owing an additional $45,000 to her lender. “It seemed so real to me and I bought into it,” said Slack, 34. “I still have the debt.”
On Tuesday, Slack became a public face of a consumer protection lawsuit filed by Minnesota Attorney General Lori Swanson against the Florida company.
Swanson said Student Aid Center charged consumers $500 to $1,500 for loan repayment and consolidation plans that they could submit for free through the U.S. Department of Education. She also said the company misled consumers with promises of loan forgiveness, but merely submitted consolidation and repayment applications in their behalf, sometimes after months of delay.
“It leads people to think that there is some special relationship with the federal government,” Swanson said at a news conference Wednesday, adding that she plans to work with state and federal regulators on the matter.
Officials at Student Aid Center could not be reached for comment on Wednesday.
More than 800 Minnesota residents have signed up for debt relief services with Student Aid Center, according to the attorney general’s office.
Minnesota ranks fifth in the nation in student loan debt, with borrowers owing an average of $30,894, according to 2013 data from the Institute of College Access & Success, a research nonprofit.
Swanson’s suit, filed Tuesday in Hennepin County District Court, seeks restitution and a court order for Student Aid Center to cease its practices.
The 26-page complaint alleges that the company routinely collects bank account or credit card information to withdraw payments, sometimes over several months. It alleges that the company collected fees before starting or completing work, which is prohibited by state law.
“Some people saw their [debt] balances go up and not down,” said Swanson.
Also included in the suit are what appear to be Instagram photos of a top company executive bragging about how much money the company was making and references to the Hollywood film, “The Wolf of Wall Street.”
Swanson’s suit also accuses Student Aid Center of failure to register with the Minnesota Department of Commerce, failure to include all terms of the state Debt Settlement Services Act in its agreements, and using power-of-attorney forms that extinguish or limit the right of borrowers to communicate with their lenders.
“During telephone calls with consumers, Student Aid Center has made myriad other misrepresentations to induce them to provide payment information during the sales calls,” the suit states.
Rebecca Konz, 34, of Owatonna, said she called the company after she struggled to pay down her $40,000 in student loan debt. She became suspicious of the power-of-attorney form and other contract documents that were e-mailed to her; Konz said they were later submitted to her loan servicer against her wishes with a forged notarized signature.
Eventually, said Konz, she was forced to close her bank account after the company continued withdrawing hundreds of dollars in payments.
“It wasn’t right what they were doing,” said Konz, a teacher.
Federal student loan borrowers can get information on repayment programs through the U.S. Department of Education at www.studentaid.ed.gov/sa/repay-loans. Concerned consumers can call the attorney general’s office at 651-296-3353 or 1-800-657-3787, or file a complaint by downloading a form at www.ag.state.mn.us.
Marcus E. Howard 612-673-1720