Second of two parts. Read part I.

When Dr. Elizabeth Rosainz hired a company called Student Loan Service (SLS) Managers to handle her $175,000 federal student debt, she hoped to lower her monthly payments and hand off the onerous chore of managing loan repayment.

Not only did that not happen, the company put her behind on her debt. Seven months after Rosainz signed on with SLS Managers, she discovered the company had made no payments on her behalf as promised. In a call to her loan servicer, she learned that nearly $7,000 in interest had been tacked onto her loan during the period that she delegated the job of payment to SLS Managers. And oh yes, the loan servicer representative said, her account was delinquent.

Rosainz was livid.

If payments weren’t being made on her account, why was SLS Manager making withdrawals from her checking account of nearly $240 a month, of which roughly $156 supposedly was going to pay her loan?

As angry as Rosainz was at the company, she also mentally kicked herself. “I was mostly like: How could I get duped by these people?” said Rosainz, a veterinarian in Florida.

Beginning the arduous process of regaining control, she removed SLS Managers as the account holder and resumed making loan payments herself.

She emailed NSProcessing, an apparent affiliate of SLS Managers, to terminate the agreement. “And I want the full amount” — $3,247.62 — “refunded that I’ve paid to you since starting with your company,” she wrote.

Three days later, she received the reply, “Student Loan Service Managers has agreed to grant your request and has been released from any liability in managing these accounts.” The company would forward any mail to Rosainz’s address, the message said.

Rosainz replied that her address had changed. She asked, “Is my money being refunded?”

NSProcessing: “We have already cancelled your account with us.”

Rosainz: “I know that. … I need you to forward mail to where I actually live.”

NSProcessing: “OK well we have not receive [sic] any mail and if we did we will forward it to you. Have a great day!”

Rosainz: “[I]s my refund being sent to me?”

No reply.

When Rosainz called the company, a representative said a refund would be in the mail. A week later, it hadn’t arrived.

Rosainz’s co-workers at Aventura Animal Hospital knew of her plight. One day, Rosainz’s boss showed her an article. It was a VIN News Service commentary by Dr. Tony Bartels about creating a strategy to repay student loans.

Rosainz emailed Bartels for advice on how to renegotiate her loan payments and handle the debt-relief company. “I’m desperate to get my money back at the very least,” she wrote.

Crooked, sloppy messes

Bartels is a veterinarian with an MBA who wound up helping veterinarians with financial issues after trying to help clean up one of the largest bankruptcies in history.

During the early 2000s, before he was a veterinarian, Bartels worked in corporate finance, which taught him the ins and outs of business mergers and acquisitions, as well as bankruptcy and restructuring. It also taught him how those with money and power can use — and sometimes abuse — the system, which he found frustrating.

That frustration peaked with the spectacular collapse of Enron, an energy-trading company based in Houston. For years, Enron’s business model garnered praise, but later, its leadership confessed to misstating company income and lying about its equity value. The company also fabricated “partnerships” with fictitious companies to hide debts.

When Enron declared bankruptcy, tens of thousands of employees lost their jobs, and thousands of investors lost billions of dollars. With losses totaling nearly $66 billion, specialists in the corporate finance world were sought to help mop up the mess. Bartels was one of them, tapped to determine the value of Enron contracts with other businesses for the bankruptcy proceedings.

Afterward, fed up with the industry, Bartels sought a change. He went back to school, enrolling in Colorado State University’s DVM/MBA combined-degree program. Shortly after graduating in 2012, he began working for the Veterinary Information Network, an online community for the profession. There, Bartels is the go-to person for questions about student debt. He also works on student-debt awareness tools and programs offered free of charge through VIN's nonprofit arm, the VIN Foundation. One such tool is a cost-of-education map that enables users to evaluate and compare the full cost of education at 33 veterinary schools in the United States and Caribbean. Another tool is a student-loan repayment simulator.

Bartels said he understands why a borrower, confused by loan-repayment options, would seek help from a debt-relief company. “It’s because the loan servicers are so bad at their jobs,” he said.

Servicers could, but do not, provide borrowers with regular notifications explaining repayment options, he said. And servicers could, but do not, warn borrowers that they may receive mailers and pitches from companies that promise to lower payments and set up repayment plans — actions that borrowers can do themselves for free.

Heather Jarvis, a lawyer with broad expertise in student debt, agrees that loan servicers are notoriously difficult to interact with, and that they often are staffed by undertrained people who tend to read scripts in response to borrowers’ questions. When questions become difficult, servicers’ responses may not be clear. “[Y]ou have a situation where you have [borrowers] who have to get their advice from their debt collectors — which is not ideal,” Jarvis said.

In fact, the U.S. Consumer Financial Protection Bureau in September issued a damning report on the failures of companies servicing federal and private student loans alike.

As summarized in a bureau press release, “Consumers describe companies using a wide range of sloppy, patchwork practices that can create obstacles to repayment, raise costs, cause distress, and contribute to driving struggling borrowers to default.” 

Report chronicles ‘shady’ debt-relief companies

This environment has created opportunity for debt-relief companies. Their proliferation led the National Consumer Law Center (NCLC) a few years ago to study the industry’s tactics, according to Persis Yu, a staff attorney and director of the center’s Student Loan Borrower Assistance Project. The result was a report in 2013, “Searching for Relief: Desperate Borrowers and the Growing Student Loan ‘Debt Relief’ Industry.”

“Our investigation shows that student loan debt relief companies can easily cross over into practices that violate key consumer laws, provide inaccurate and misleading information, and take student loan debtors’ money without providing valuable services,” the report states.

One practice it highlights is the use of power-of-attorney documents. Of 10 companies contacted by an NCLC employee who posed as a debt-ridden student, nearly all required borrowers to agree to granting a power of attorney authorizing the company to take over the borrower’s account. This practice can create a thicket of legal issues because some states require that powers of attorney indicate a person, not a company, as an agent, the report notes.

Rosainz, who was drawn into the debt-relief industry through a radio ad, used an e-signature to grant power of attorney to NSProcessing, the entity that sometimes acted on behalf of SLS Managers.

The exact relationship between NSProcessing and SLS Managers is unclear. When the VIN News Service called SLS Managers’ toll-free number in mid-May, the person who answered said: “We only speak to our clients. We don’t talk to anyone on the outside.”

Until recently, the companies’ websites showed they occupied different suites in the same Laguna Hills, California, office building. In early June, the SLS Managers website went offline. Its Facebook page shows no post since July 28, 2014. Its telephone numbers no longer work.

Last week, a customer service agent who answered the telephone at NSProcessing said the company headquarters were in Laguna Hills but he physically was in Alisa Viejo, three miles away. The agent said he was unable to answer other questions but would ask a superior to return the call. The call was not returned. Multiple emails from the VIN News Service to SLS Managers and NSProcessing also went unanswered.

A real estate executive who said he brokered the companies’ move into the Laguna Hills building two or three years ago told the VIN News Service last week that they have since moved. “They outgrew it,” said Dave Smith, senior vice president of Lee & Associates. Smith said the companies left a few months ago and he did not know to where they moved.

As Rosainz experienced with SLS Managers, many debt-relief companies require borrowers who want to enroll in a repayment plan to pay them a fee upfront. The U.S. Department of Education (USDE) warns borrowers of "deals" that require payment to be enrolled in repayment plans for which the government does not charge.

The NCLC report explains that while it isn’t illegal for a company to charge for something that borrowers can do themselves for free — think of companies that charge for income-tax preparation — some federal telemarketing and credit-repair laws make it illegal in certain circumstances to charge for a service before it’s completed.

Yu said the growing confusion surrounding student loans makes it easier for borrowers to fall for debt-relief scams; to what degree, she does not know. But about this, she is certain: “They’re operating in shady ways that cost a lot of people money."

How to manage student loans yourself

Bartels and his wife, also a veterinarian, graduated with student loans totaling $400,000. His personal experience researching various repayment plans to determine which are better suited for his household taught him that he, and not a company, had to manage his own debt.

To navigate the complicated array of repayment options, he suggests:

• Check out the National Student Loan Data System (NSLDS), the USDE’s central database that documents the majority of a borrower’s federal student loan history. (Federally backed loans provided by a university, such as professional student loans or those for disadvantaged students, aren’t in the database.)
• Examine your credit report to identify loans that aren’t included in NSLDS.
• Identify your loan servicer, which can be done on NSLDS, and contact the servicer to discuss repayment options.
• Verify the information your loan servicer provides you.
• Become familiar with studentloans.gov, which has an electronic portal to help enroll in a federal consolidation loan program or apply for an income-driven repayment option.
• Set phone/computer alerts as reminders for key dates, such as when a repayment plan needs to be renewed.

In addition to managing debt short-term by using an income-driven repayment plan if eligible, Bartels advises borrowers to take the long view on debt management, too. That’s because income-driven repayment plans provide for debt balances to be forgiven after 20 to 25 years of payments, and forgiven balances generally are subject to income tax. Depending on the size of the forgiven sum, the tax liability could be substantial.

“It is likely that many veterinarians will have a loan balance remaining to be forgiven ..." Bartels said, noting that many young veterinarians today have debt-to-income ratios greater than 2-to-1 — meaning they owe more than twice as much as they earn in a year. Therefore, figuring out how much they need to save to pay the tax hit down the road is “a crucial piece of their student-loan repayment education, as well as [part of] their long-term financial plan,” Bartels said.

Saving for emergencies, retirement and other goals is another consideration. For that reason, minimizing loan payments, even if it means watching one’s balance grow rather than shrink, can be the wiser course, Bartels said, noting that doing so potentially may save a borrower tens, even hundreds, of thousands of dollars over the long haul.

In Rosainz's case, Bartels said he counseled her to learn what options she had and then become her own best advocate. But as for her obtaining a refund from SLS Managers, he thought it unlikely. “Once they have your money,” Bartels said, “they’re very reluctant to give it back.”

Rosainz followed Bartels’ advice. Familiar with loan servicer? She was. Investigate options for consolidation? Do that. Eventually, she enrolled in an income-driven repayment plan called Pay As You Earn.

She also persisted in pursuing SLS Managers. When, five months after canceling the agreement with them, she still hadn’t received a refund, Rosainz contacted the Better Business Bureau (BBB) to complain.

“I just got sick and tired of dealing with it,” she said.

At the time Rosainz lodged her complaint against SLS Managers, 81 other customers had already done the same. (As of today, the BBB had received 92 complaints in three years.) The bureau has placed an alert against the company and given it an F rating. NSProcessing also has an F rating from the BBB. The bureau identifies the owner of NSProcessing as Dean Robbins and the manager as Mike Radwan.

Many of the complainants against SLS Managers, like Rosainz, informed the BBB that they sought refunds. In some cases, SLS Managers told bureau officials the company had contacted the customers, but some of the customers weren’t satisfied with the interaction. Rosainz felt sure her money was long gone. Then one day, she checked her bank account, and there was a deposit from SLS Managers.

“They actually refunded every cent that I paid them,” she said, elated that her efforts had paid off.

The elation faded later when she realized that wasn’t quite the case.

Asked by the VIN News Service to verify the amount of the refund she received last summer, Rosainz recently discovered SLS Managers had refunded only $2,336.46 — about $911 less than what she believed she was owed.

“I don’t know how I missed that at the time,” she said.

After contemplating trying to contact SLS Managers about the missing money, Rosainz decided it would be too exasperating. "I just knew I wasn’t going to get through to them," she said Friday. "I would love to get the money back; it’s just frustrating to deal with."

On Monday, during a call to her loan servicer Navient to double-check a few things, Rosainz was gratified to encounter a sympathetic agent. “She said not to worry, that since February of 2015 after I parted ways with SLS, I’ve made solid payments and am handling my account well,” Rosainz reported. The agent told Rosainz that she knows of borrowers who had worse experiences with debt-relief companies, “people that ... paid over $1,000 monthly to find out that no payments were being made.”

Now, thinking about new veterinary graduates facing the daunting task of managing their student debt payments, Rosainz has this advice: "Definitely, definitely, do your research. Read directly from the Department of Education pages and websites, and know what you're doing before you contact any company [for payment help]. And certainly, any companies like [SLS Managers], just avoid," she added. "Why pay somebody to do something you can do yourself?"