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Students earning degrees at Pasadena City College participate in the graduation ceremony. Photo: Robyn Beck/AFP/Getty Images

Companies are increasingly targeting student debt borrowers by selling scams that promise to help reduce or forgive loans, the Wall Street Journal reports.

Why it matters: A record $89.2 billion worth of student loans had been defaulted on at the end of June, while 11% of the $1.48 trillion in total outstanding loans was "at least 90 days behind on repayments," according to New York Federal Reserve data. The companies identified by the WSJ — some of which are legally allowed to operate — have been flagged by regulators that warn the services they offer are usually free. Other companies are fraudulent, regulators say.

  • "Many of the [Federal Trade Commission] cases allege that the companies charged upfront fees for debt relief, which is illegal, or engaged in other prohibited practices such as masquerading as being government-approved, or faking information on applications for federal relief," WSJ's Jean Eaglesham, Michael Tobin and Coulter Jones write.

The big picture: The FTC and the Consumer Financial Protection Bureau are responsible for oversight of these companies. Problems have cropped up where the firms offering these services use several names.

  • Identical testimonials appeared across 26 websites of supposedly different companies, which gave positive reviews for debt-relief services, WSJ found.
  • The FTC "filed nine civil cases against alleged student-loan debt-relief scams since 2017, involving a total of 77 different companies," per WSJ.
  • One company the Journal highlighted was Financial Preparation Services, which submitted claims for federal relief with fake information, a former employee said. Federal regulators are demanding more information about FPS and several other companies, according to a bankruptcy court filing.

Between the lines: Federal relief programs do exist and offer a reduction or forgiveness of debts for those who qualify, such as public-service workers or people with low incomes. Last week, President Trump signed an executive order that will cancel student loan debt for permanently disabled U.S. military veterans.

Go deeper

Updated 3 hours ago - World

Biden reviews U.S. arms deals with Saudi Arabia and UAE

Trump struck several large arms deals with Mohammed bin Salman (L) and Saudi Arabia. Photo: Kevin Dietsch-Pool/Getty Images

The Biden administration has put on hold two big arms deals with Saudi Arabia and the United Arab Emirates which were approved in the final weeks of the Trump administration, a State Department official told Axios.

Why it matters: The sales of F-35 jets and attack drones to the UAE and a large supply of munitions to Saudi Arabia will be paused pending a review. That signals a major policy shift from the Trump era, and may herald sharp tensions with both Gulf countries.

Trump supporter found with pipe bombs accused of plot to attack Democrats

Five improvised explosive devices that the FBI says "were fully operational and could cause great bodily harm or injury if handled improperly." Photo: FBI/Justice Department

The FBI believes California Gov. Gavin Newsom (D) and the Bay Area headquarters of Twitter and Facebook were targets of a man facing federal explosives charges, according to a criminal complaint.

Driving the news: Prosecutors charged Ian Benjamin Rogers after finding weapons including five pipe bombs, 49 guns and thousands of rounds of ammunition following a Jan. 15 search of his Napa County home and auto repair business. His alleged goal was to ensure former President Trump remained in office.

7 hours ago - Health

Fauci: COVID vaccine rollout needs to prioritize people of color

Anthony Fauci. Photo: Alex Wong via Getty Images

Infectious disease expert Anthony Fauci highlighted the need to address racial disparities in the COVID-19 vaccination process, per an interview with The New England Journal of Medicine on Wednesday.

What he’s saying: "I think that's the one thing we really got to be careful of. We don't want in the beginning ... most of the people who are getting it are otherwise, well, middle-class white people."