Photo by Natalie Hoogendorn

Dr. Elizabeth Rosainz found out the hard way that it's safer to manage her student debt herself than to pay someone else to do it.

First of two parts.

The day that Dr. Elizabeth Rosainz heard the radio ad, she thought she’d soon be free of struggles with student-loan debt. Instead, she became ensnared in an unexpected financial trap.

While driving to Aventura Animal Hospital in southern Florida, where she had just begun working as an associate veterinarian, Rosainz heard a voice on the radio say the federal government wasn’t giving borrowers the full story about student-loan repayment plans. But there was a company, the advertiser said, that could help borrowers whittle their federal loan payments, even lower interest rates.

Rosainz listened, rapt. Seven years earlier, in 2007, she enrolled in St. George’s University School of Veterinary Medicine in True Blue, Grenada, using private loans to cover more than $65,000 for her schooling there. In 2009, she transferred to Oklahoma State University Center for Veterinary Sciences. By the time she got her diploma in 2012, her student debt reached about $241,000, including federal student-loan debt of more than $175,000.

So to hear that this company, called Student Loan Service (SLS) Managers, could cut interest rates on the federal loans Rosainz took out to attend OSU? "I remember getting very excited, thinking, ‘Oh, wow, maybe I can get my loan amount reduced,' " Rosainz recalled in an interview with the VIN News Service.

Rosainz was so excited, she called SLS Managers at the next stoplight. She spoke to a representative named Kris Hull. As Rosainz recalls, Hull told her the company could lower her payments, but first, it had to take over her loan. Rosainz was told the loan would be placed in forbearance, a status that, under the federal student loan program, allows a borrower to reduce or stop making payments for up to 12 months, although interest continues to accrue. SLS Managers would take care of making the payments.

As Rosainz understood it, the company would debit her checking account for a "down payment" in order to start paperwork on a loan consolidation. The company would then debit from her account a recurring monthly fee. Hull, Rosainz was told, would act as her personal loan representative; Hull provided a phone number she said was her direct line. All Rosainz needed to do was sign a service agreement.

Rosainz hesitated. After all, she already was enrolled in a federal income-driven repayment plan called income-based repayment (IBR), under which her payments were reduced commensurate with the $34,500 she earned the previous year as an intern at Hollywood Animal Hospital. Rosainz's IBR plan gave her up to 25 years to pay her federal student loans, a significant reprieve from the 10 years available under a standard federal repayment plan. And after 25 years, any balance would be forgiven. (Forgiven balances are taxable, however.)

Rosainz paid roughly $400 a month under IBR, which still was a financial strain, in part because she made separate payments of $500 per month on her private student loans, which do not qualify for federal repayment programs.

Overall, her debt was a constant emotional strain.

The U.S. Department of Education (USDE) offers multiple repayment plans, including several income-driven repayment plans, of which IBR is one. There is no charge to participate in any of them, nor to consolidate loans.

Loan servicers can help borrowers apply. But Rosainz found her loan servicer couldn’t answer her many questions about IBR, such as: If my income increases, will my loan payments increase immediately or only when I renew IBR each year? Would my loan payments increase if I got married?

And there were questions that Rosainz didn’t even know at the time to ask, such as: Is there another income-driven plan that I might qualify for that is more beneficial?

Much as she wanted more knowledgeable guidance, Rosainz had concerns about what SLS Managers could do for her, concerns she expressed to Hull as she drove to work. She wasn’t sure a company could reduce her interest rates, and she worried that if interest capitalized on her loans while they were in forbearance — meaning interest was added to the principal, causing interest to accumulate on interest — she’d have to pay more in the future, not less. Hull never let up the pressure.

"She made it seem as if I’d be crazy not to let them take on my loans and reduce the amount I’d pay monthly, and overall in the long run," Rosainz recounted.

She decided to do it.

During the 15-minute conversation, Rosainz relayed basic information about her loans. After the call, Rosainz received an email with a link to a seven-page packet that contained a service agreement. The packet included a "Limited Special Power of Attorney," a legal document that would appoint a specified agent — in this case, the company processing the agreement — to act on her behalf in regard to her student loans.

That same day, Rosainz filled out the packet, providing her Social Security number and checking-account information. She applied an e-signature and returned the agreement.

A few days later, Rosainz received a welcome email from a company with a different name. "Thank you for choosing National Secure Processing (NSProcessing) via Student Loan Service Managers to manage your student loans," the message read. "We are confident that you will be very satisfied with the services that we provide." Now it seemed that she was dealing with not one, but two companies.

Rosainz’s account was debited three days later for a "down payment" of $1,750. That amount had been specified in the emailed documents, which also showed a recurring monthly loan-payment fee. Hull had told Rosainz she’d receive an account statement.

A month later, Rosainz’s account was debited for the first monthly fee of $239.66, but the promised account statement still hadn’t arrived. Rosainz called SLS Managers. Hull wasn’t there. They never spoke again.

It was at this point that Rosainz began to feel uneasy. "After her first email and never hearing from her again, I just all of a sudden felt bad and felt like something was not right," she said. "But I kept telling myself, ‘No, no, no. Just don’t. Trust it.’ "

So began a yearlong ordeal in which Rosainz sought to untangle herself from a company she’d hoped would make her financially stronger but did the opposite. By the time she severed ties with SLS Managers, Rosainz was out nearly $1,000 and lost time on paying down her loans.

Her experience explains why debt experts caution borrowers against placing their faith and money in an unregulated industry, and why federal officials plan next month to institute a system to track complaints focused on the dubious and sometimes illegal actions of debt-relief companies.

‘Ripe conditions’ create debt-relief industry

Student debt in the United States is a growing financial beast, one that besets millions of Americans.

As of June 1, the nation’s student loan debt topped $1.35 trillion, according to the financial news site MarketWatch. In 2015, consumer credit reporting agency Experian reported that 40 million people in the United States carry student-loan debt.

Many veterinarians are caught in the jaws of the crisis. In 2015, an American Veterinary Medical Association survey of new veterinary-school graduates found that those who used school loans reported an average debt of $160,435. The group with loans comprised 88 percent of new veterinary graduates.

The Obama administration and Congress have taken some well-publicized steps to address the national student-debt crisis in the past several years. Under companion legislation to the Affordable Care Act known as the Health Care and Education Reconciliation of 2010, for example, provisions of IBR were made more generous for new borrowers. In 2011 and 2015, two more income-driven repayment plans were born, Pay As You Earn and Revised Pay As You Earn.

Altogether, there are 10 or so federal repayment plans, depending on how you count — some programs, such as IBR, come in older and newer versions. There also is a Public Service Loan Forgiveness program for borrowers who work for a government agency or 501(c)(3) nonprofit organization.

Although intended to ease burdens, the expanding smorgasbord of repayment options, identified by an alphabet soup of acronyms and with varying eligibility criteria, greatly confuses borrowers, veterinarians included. "And when there are desperate people who are suffering, the unscrupulous people come out of the woodwork," said Heather Jarvis, a student-loan expert. "It’s horrible, that you can get this debt so easily and then have such a hard time getting out."

Jarvis advises that when encountering a company that claims it can reduce student-loan debt borrowers should investigate the company the way they would check out a physician or mechanic. "If it seems like a mass-market, cookie-cutter kind of thing, it’s probably worse than worthless," she said.

In general, Jarvis said, be skeptical about debt-relief companies that promise services for a low price. "There are clearly people who believe there is a buck to be made off people’s confusion and frustration and vulnerability," she said.

Persis Yu agrees. Yu is a staff attorney at the National Consumer Law Center and director of the center’s Student Loan Borrower Assistance Project. She said borrowers’ confusion around their options and media attention paid to the student-debt crisis create ripe conditions for the growth of debt-relief companies. She estimates there are hundreds, if not thousands, of such companies in the country.

"They’re taking advantage of the massive amount of debt, the massive amount of confusion and the massive amount of frustration there is around student-loan debt," Yu said.

In her experience, most debt-relief companies use this business model: They promise to help debt-ridden borrowers acquire loan forgiveness or lower monthly payments; charge a large one-time, upfront fee; consolidate the loan; then charge an ongoing monthly fee.

Some of the activities are illegal. In the past two years, federal and state officials have filed lawsuits against dozens of debt-relief companies, resulting in judgments for borrowers of more than $11 million collectively.

But the chase by law enforcement has been catch-as-catch-can. Advocates for borrowers lament the lack of a national database that tracks debt-relief companies and complaints against them. Now the federal government is out to remedy that.

On July 1, the USDE will launch an "Enterprise Complaint System" (ECS) that will enable borrowers to log complaints, compliments or allegations of suspicious activity against colleges, loan servicers and debt-relief companies.

The ECS grew out of the Student Aid Bill of Rights set forth by President Obama in March 2015. It states in part that "every borrower has the right to quality customer service, reliable information, and fair treatment, even if they struggle to repay their loans."

The USDE’s enforcement unit will share data from the ECS with federal and state agencies so they can "investigate bad actors and ensure borrowers and taxpayers are protected," USDE spokeswoman Kelly Leon said by email.

'It's a really risky thing'

Dr. Tony Bartels, a veterinarian and MBA who handles student-debt questions and issues at the Veterinary Information Network, an online community for the profession, is an avid proponent of borrowers managing their own debt repayment

"If you have no idea what’s going on with your loans, you’re screwed if that company folds," Bartels said, adding, "GL Advisor left a lot of veterinarians hanging."

The reference is to Graduate Leverage LLC, also known as GL Advisor, which opened in 2003 as a debt-relief company focused on borrowers. Early on, some veterinarians praised the company’s assistance. Over time, comments went from positive to negative.

In March, CEO and founder Daniel Thibeault was convicted of committing $15 million in fraud and obstructing justice. He was sentenced last week to nine years in federal prison. Although the fraud charge involves a mutual fund the company created and not its loan-management services, the criminal investigation affected the entire operation. The company is now shuttered.

When borrowers pay debt-relief companies, Bartels said, they might be tethering themselves to a 25-year experiment — the length of some repayment plans — to see if the company fulfills its promises. "It’s a really risky thing to do. It can have real repercussions," he said.

Rosainz didn’t need to wait 25 years to find out whether SLS Manager would fulfill its promises. In February 2015, after seven months of getting nowhere with them, she called her loan servicer. It was then that she learned she was overdue on payments, and owed an extra $7,000 in interest.

The news was dumbfounding. "Unbelievable," Rosainz said.

SLS Managers and its apparent affiliate, NSProcessing, did not respond to multiple emailed requests for comment from the VIN News Service. A person who answered SLS Managers’ telephone said, "We only speak to our clients. We don’t talk to anyone on the outside."

The VIN News Service was unable to locate Kris Hull, the former SLS Managers employee who acted briefly as Rosainz's loan representative, for comment.

Rosainz realized she had given the power to SLS Managers. As for getting help from her loan servicer, she said, "There was nothing they could really do."

That meant the only person who could help Rosainz confront the debt-relief company and regain control of her finances was herself.

Tomorrow: Going on the offensive against SLS Managers.