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How to Spot Student Loan Scams
Student loan forgiveness is currently a hot topic in the United States. Because of this, student loan forgiveness scams have multiplied. There are many illegitimate companies that claim they can arrange to have student loans forgiven. Luckily, there are several red flags to help you know how to spot student loan forgiveness scams. Continue reading to learn the red flags and protect yourself from student loan forgiveness scams!
Also see: How to consolidate and refinance student loans
They offer services in exchange for payment
Many student loan forgiveness scams involve companies taking payment in exchange for a service that you could do for free yourself. The Department of Education or a private lender would never ask you for money to perform services. You always have the option to get help with your student loan payment plan or forgiveness options for free.For example, a company may claim that they can check your eligibility for student loan forgiveness for a fee. Even if the scammer does check your eligibility, you could have done it for yourself for free. Contact your loan servicer to receive updates about your qualification for student loan forgiveness through programs such as Public Service Loan Forgiveness or an income-driven repayment plan.
A fraudulent company may also claim that they can negotiate a forgiveness deal with your lender for a cost. Do not give any money to a company that says this–no person or entity can negotiate a “deal” for loan forgiveness.
Over all, be wary of any company that claims to provide student loan forgiveness services for payment. There is nothing that a debt company can do for your student loans that you can’t do for free.
They request personal information
If a debt company asks for information such as your FSA ID, social security number, or credit card number, it is likely a scam. The Department of Education or other legitimate lenders will not ask you to share such information. The U.S. Department of Education provides a list of student loan providers. These are the only organizations you should discuss your student loans with.
An illegitimate company may claim that, using your personal information, it can enroll you in a student loan forgiveness program. In reality, they will use this information to log into your student loan accounts and make decisions on your behalf. You may even lose access to your account completely.
Also, keep an eye out for advertisements that contain a form to enter personal information. These ads may claim that, by filling in the information, you can receive student loan forgiveness. Oftentimes, these forms are used to collect personal information and send it to other scam companies.
They promise immediate student loan forgiveness
There are legitimate ways to receive student loan forgiveness through federal programs. However, these programs are not immediate, and they have strict qualifications. Public Service Loan Forgiveness takes 10 years to earn, and borrowers must work for the government or a non-profit. Loan forgiveness from an income-driven repayment plan takes 20 or 25 years to earn. No debt company can get anyone immediate student loan forgiveness.
Representatives of fraudulent companies may claim that their student loan forgiveness program is “first come first serve” or that you must act immediately to qualify. These are pressure tactics to make the issue seem urgent. No legitimate lender would make these claims. Remember, you always have time to make informed decisions about your debt.
An illegitimate company might also cite “new legislation” regarding student loan forgiveness in order to seem credible. There is currently no legislation that offers broad student loan forgiveness.
COVID-19 student loan forgiveness scams
Student loan forgiveness scams thrive in times of hardship and confusion. The financial repercussions of the COVID-19 pandemic have left student loan borrowers desperate for relief. In turn, the pandemic has also provided student loan scammers with new material.
Student loan forgiveness scams may cite “Biden student loan forgiveness” or “stimulus forgiveness.” These are terms that sound familiar to most people, so they may believe that the company is legitimate. As mentioned earlier, there is no legislation allowing broad student loan forgiveness. There was also no student loan forgiveness included in the two coronavirus stimulus packages.
Another COVID-19 related scam you may come across is in regard to the administrative forbearance. Some fraudulent companies are claiming that you must fill out a form or pay a fee to receive this forbearance. All borrowers of federal student loans received an automatic pause on their monthly payments until September 30, 2021. You do not need to take any action to receive it.
Student loan forgiveness scams are everywhere, and sometimes they can be difficult to spot. Be cautious of any debt relief company that shows these red flags when it comes to student loan forgiveness. Always do your research before paying or discussing your loans with anyone other than your loan provider.