When Katelynn Moreau opens her financial aid emails, she casually glances over them and then clicks the red x at the corner of her browser.

Moreau, a senior advertising major, is close to finishing her time in college and soon she will have to pay for the loans that cover part of her Syracuse University education. But Moreau said she doesn’t know much about the conditions of her borrowing.

Like many of her peers, she said she just skims over most of SU’s financial advice. The university’s Office of Financial Aid and Scholarship Programs sends a number of financial aid resources every semester such as their financial aid newsletter, “I Otto Know This” financial literacy program and MySlice reminders.

“A few students know a lot about their loans and repayments but my feeling is that the majority do not know a lot,” Cindi Comins, assistant director of financial aid at SU, said in an email.

A lack of knowledge can leave students vulnerable to manipulation, to which the New York state government is taking action. In his 2014-2015 budget, Gov. Andrew Cuomo established the Student Protection Unit within the New York Department of Financial Services, according to a Jan. 22 press release from the governor’s office.

The Student Protection Unit aims to investigate improper conduct in the debt relief industry and promote consumer education that will allow students to make wise financial choices. Cuomo announced in the release that the unit issued subpoenas to 13 student debt relief companies in its first official action. The unit is investigating companies that potentially supply misleading information and charge excessive fees for services available for free through the federal government.

The average New York state student leaves college with $27,310 of debt. To help students cope with financial strains, the governor’s office hopes to eliminate monetary pitfalls by providing consumer education and investigating misconduct.

“We want to make sure that companies aren’t hitting students with hidden and high fees,” said Matthew Anderson, a spokesman for the Department of Financial Services.

The DFS unit will look into student loan industry practices that could violate consumer protection laws and hurt students already struggling financially. It will investigate “concerns that the industry is charging high, improper fees without adequate notice for enrolling students in debt relief programs that are available for free through the federal government,” according to the release.

Anderson said he couldn’t outline the extent of investigations beyond the subpoena of the first 13 companies. DFS needs to survey the industry before deciding if more action is necessary, he said.

Default Student Loan Assistance, LLC, one of the companies to which the governor’s office issued a subpoena, says on its website that it builds “custom debt consolidation packages that make paying back your students loans, at your pace, a reality.” The company didn’t return a call for comment on the subpoena.

To set an agenda for future action, the unit will evaluate the practices of companies like Default Student Loan Assistance, LLC, Anderson said.

“We’re going to take a look at the industry broadly and decide what action we’ll take in the future,” Anderson said.

Students who take out multiple loans to fund their education can consolidate payments to reduce stress and sometimes costs, according to the Federal Student Aid website. The federal government offers a service, free of additional charge, which combines federal education loans into one monthly payment to the U.S. Department of Education.

The federal government provides free consolidation, but many debt relief companies charge for the same service, Anderson said. Misleading information can rope uninformed students into agreements that sap resources with excessive or hidden fees, he said.

Ian Heim, a first year graduate student in information management, consolidated loans after he graduated from SU last year. Heim is now married, and he and his wife hoped to consolidate their undergraduate loans into one payment, he said.

Since he was pretty well informed about his borrowing conditions, Heim avoided the pitfalls some other recent graduates encounter. Though he said he can’t remember if he paid an additional charge, Heim consolidated the payments through Sun Trust Bank, a national holding company.

Students who are unaware of the federal debt relief options could possibly approve a misleading agreement. Moreau said she hadn’t heard of the federal government’s consolidation service and quickly realized that she could have ended up paying to combine her loans.

Some companies also charge students to help lower payments through income based repayment or pay as your earn programs, which the federal government originally implemented, Comins, the assistant director of financial aid, said. Qualified students can use those services for free through the government but many don’t realize they exist, she added.

“If a student qualifies, they’ll put them into those programs. They just have to ask,” Comins said.

In order for the Student Protection Unit to serve its purpose, it depends as much on students’ awareness as government cracking down on debt relief companies, Anderson said. DFS is expanding consumer outreach in conjunction with the Student Protection Unit’s investigations, he said.

“It’s extremely important now to educate young people about good financial habits,” Anderson said.

Comins said she approves of the Student Protection Unit concept if it uncovers that the companies are, in fact, breaking consumer protection laws.

Scams and tricks in the student loan industry can’t gain traction if students and their families gain an understanding of payment options, Comins said. The Student Protection Unit plans to address students’ understanding of loan conditions.

She added that students have resources available to them, including the National Student Loan Data Center and required exit loan counseling upon graduation. Accessing educational resources remains a vital protection against misleading information, she said.

Said Comins: “There’s just a lot of companies out there looking to make money. If a student or family doesn’t know all of their options or isn’t aware of all their options, it may be difficult for them.”

Published on January 30, 2014 at 1:53 am

Contact Jacob: jspramuk@syr.edu