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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

22 mins ago - Health

FDA panel backs Merck's antiviral COVID pill

The Merck Cherokee Plant in Riverside, Pennsylvania. Photo: Paul Weaver/SOPA Images/LightRocket via Getty Images

A Food and Drug Administration advisory panel on Tuesday voted 13-10 to endorse an antiviral pill developed by Merck and Ridgeback Biotherapeutics to treat adults at high risk of becoming severely ill from COVID-19, despite concerns over its effectiveness and safety.

Why it matters: Oral antiviral drugs designed to prevent or treat COVID-19 could be key pandemic-fighting tools, if proven effective, especially as new variants emerge. If authorized, the Merck drug, known as molnupiravir, would be the first treatment of its kind to be made available in the United States.

Shooting at Michigan high school leaves 3 dead, 6 wounded

Screengrab: CBSN

Three people dead and six others are wounded after a shooting at a high school in Michigan according to the Oakland County Sheriff's Office.

Driving the news: The alleged shooter was a 15-year-old sophomore at Oxford High School and has been arrested, per police.

Fed signals it could yank economic support quicker as inflation sticks around

Federal Reserve chairman Jerome Powell testifies during a hearing before Senate Banking, Housing and Urban Affairs Committee today. Photo: Alex Wong/Getty Images

The Federal Reserve will consider pulling back economic support sooner "as the threat of persistently high inflation has grown," chair Jerome Powell said during a congressional hearing on Tuesday.

Why it matters: This is the biggest signal yet the Fed is backing away from its stance that soaring prices would be fleeting — a change that could shift its policies that underpin the economy.