Earlier this week, JPMorgan Chase shut down college financial aid platform, Frank, which it acquired in September 2021 for $175 million, alleging it was misled about the scale of the startup.
Consumers who used the platform may have also been deceived.
According to JPMorgan, Frank founder Charlie Javice told the bank that over 4 million students had signed up with the company, which promised to ease the student loan and financial aid application process. But when the bank sent out marketing emails to a batch of 400,000 Frank customers, around 70% of the messages bounced back, the bank said in a lawsuit filed last month in federal court.
Earlier, JPMorgan spokesman Pablo Rodriguez referred a CNBC reporter to its lawsuit against Javice, saying that “any dispute will be resolved through the legal process.” Javice’s lawyer, Alex Spiro, did not respond to an email requesting comment.
More from Personal Finance:
Here’s the inflation breakdown for December 2022 — in one chart
IRS to start 2023 tax season stronger, taxpayer advocate says
Social Security checks to include 8.7% cost-of-living adjustment this month
‘If it’s too good to be true, it probably is’
Before JPMorgan acquired the startup in 2021, lawmakers and a consumer watchdog expressed concerns over Frank’s marketing claims.
Bipartisan members of Congress wrote a letter to the Federal Trade Commission in July 2020, saying that Frank was “creating false hope and confusion for students” by advertising an application for pandemic-era relief funds, including the newly available emergency grants to students.
“These funds are distributed by and at discretion of individual institutions and, thus, it is impossible to provide a legitimate, uniform application for this funding,” the lawmakers wrote, adding they suspected the company of exploiting students’ data for profit.
In response, the FTC sent a warning letter to Frank, pointing out a number of claims on its website could be “unlawfully misleading consumers.” For example, it said consumers could obtain a cash advance of up to $5,000 on their student loans without being charged any interest or fees, although Frank charged a fee of $19.90 a month.
Besides the problems flagged by government officials, higher education expert Mark Kantrowitz said he noticed other questionable claims made by Frank. At one point, the company said it could complete people’s Free Application for Federal Student Aid, or FAFSA, in just four minutes.
According to the U.S. Department of Education, he noted, it takes about an hour for new applicants to complete the form, which is the main way students request financial aid to help them pay for college.
“If it’s too good to be true, it probably is,” Kantrowitz said.
Student loan, financial aid help is available for free
There are plenty of free resources families can turn to for help with financial aid, said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.
“The simplest thing to keep in mind is that nobody should ever have to pay for student loan or financial aid help,” Mayotte said. “Doing so will never get you access to a program that you wouldn’t normally be eligible for.”
The best place to start looking for that aid is at the Department of Education’s site, studentaid.gov, Mayotte said.
In addition, the nonprofit mappingyourfuture.org and TISLA’s freestudentloanadvice.org also don’t charge for comprehensive financial aid advice, she said.