Illinois Attorney General Lisa Madigan makes an announcement with U.S. Attorney General Eric Holder at the Treasury Department in 2009. Chip Somodevilla / Getty Images

In what is thought to be the first such cases in the nation, Illinois Attorney General Lisa Madigan filed lawsuits against two debt settlement companies, accusing First American Tax Defense LLC and Broadsword Student Advantage LLC of ripping off those with outstanding student loans.

“It’s welcome news,” said Andrew Ross, Professor of Social and Cultural Analysis at NYU, adding that it was about time government agencies started going after predatory lenders, which he referred to as “vultures.”

The accused scammers reportedly charged vulnerable consumers up to $1,200 in upfront fees for services that government programs offer at no cost.

“There’s a long and sad history of companies charging students and borrowers for something that is normally free,” according to Mark Huelsman, Senior Policy Analyst at Demos, a Washington, D.C.-based think tank. This happens with existing student debt, and it happens with new loan applications, as well, where “companies are charging current students to fill out the FAFSA, which literally stands for ‘Free Application for Federal Student Aid,’” said Huelsman, noting the Education Department struggled for years to communicate the difference between FAFSA.com, which was a private company charging to fill out the application, and FAFSA.gov, the site for the actual, free service.

But, Huelsman said, the Department of Education “isn’t really designed as a consumer protection agency.” He highlighted the still relatively new Consumer Finance Protection Bureau as the part of the federal government most responsible for helping debtors and cracking down on unscrupulous lenders.

Alexis Goldstein, communications director for Other98.com, also pointed to the CFPB, which, “has a very helpful online tool that routes current debtors through a series of questions about their debt, to help them figure out what sort of relief may be available.”

There is currently $1.2 trillion in outstanding student loan debt owed by nearly 40 million Americans. The average Illinois borrower owes approximately $26,000, according to Illinois Public Interest Research Group.

In June, the Obama administration announced a plan to help some graduates adjust their loan payments, but the program applied to only a fraction of those burdened with student debt.

“A Band-Aid on a gaping wound,” said Goldstein at the time.

In this environment, predatory private lenders thrive. “These companies have the oxygen to operate in this space precisely because our system of financial aid and student loan repayment is incredibly complex,” said Huelsman. “There are upwards of nine different repayment plans on federal student loans,” he said, adding “students are often eligible for deferment or forbearance that might help them when they have trouble dealing with monthly payments in the short term.”

“There are predatory firms in every aspect of finance,” notes Huelsman, “but that there is an entire high-fee business model dedicated to student borrower relief is a sign that student debt is a very substantial burden for a lot of households.”

The move by the Illinois AG is a good first step, but it is only a first step. The state-level action and CFPB information needs follow-up with criminal prosecutions on the federal level, according to NYU’s Ross. “We live in a time when the wrong people — debtors who can’t make payments — are being jailed while swindling creditors walk away with a small fine,” he said.