JP Morgan Chase & Co. headquarters, JP Morgan Chase Tower on Park Avenue, Midtown, Manhattan, New York.
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Earlier this week, JPMorgan Chase closed its college financial aid platform, Frank, which it acquired in September 2021 for $175 million, saying it was misled about the startup’s scale.
Consumers using these platforms may be cheated.
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According to JPMorgan, founder Frank Charlie Javice told the bank that over 4 million students have signed up with the company, which promises to ease student loans and the financial aid application process. But when the bank sent marketing emails to Frank’s pool of 400,000 customers, about 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 the lawsuit against Javice, saying that “any dispute will be resolved through the legal process.” Javice’s attorney, Alex Spiro, did not respond to an email seeking comment.
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‘If it’s too good to be true, it must be’
Before JPMorgan got its start in 2021, lawmakers and consumer watchdogs expressed concern about Frank’s marketing claims.
A bipartisan member of Congress wrote a letter to the Federal Trade Commission in July 2020, saying Frank “created false hope and confusion for students” by advertising applications for pandemic-era aid funds, including emergency funds newly available to students.
“These funds are distributed and at the discretion of individual institutions and, thus, it is impossible to provide a legal and uniform application for this funding,” the lawmakers wrote, adding that they suspected companies of exploiting student data for profit.
In response, the FTC sent Frank a warning letter, pointing out some of the claims on the website could be “unlawfully misleading consumers.” For example, it says consumers can get up to $5,000 in student loan financing without being charged anything, even though Frank charges a $19.90 monthly fee.
Besides the issues flagged by government officials, higher education expert Mark Kantrowitz said he sees other claims Frank could make. At one point, the company said it could complete the 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 primary way students apply for financial aid to help pay for college.
“If it sounds so good, it must be true,” Kantrowitz said.
Student loans, financial aid assistance are available for free
There are many free resources families can turn to for financial aid, says Betsy Mayotte, president of the Student Loan Counseling Institute, a nonprofit organization.
“The easiest thing to remember is that no one has to pay off student loans or financial aid,” Mayotte said. “That way you won’t get access to programs that you wouldn’t normally be eligible for.”
The best place to start looking for that aid is on the Department of Education’s website, studentaid.gov, Mayotte said.
In addition, TISLA’s nonprofit mappingyourfuture.org and freestudentloanadvice.org also do not charge for comprehensive financial aid advice, he said.