How to Spot Student Loan Forgiveness Scams
As student loan debt across the nation increases, so do student loan scams. Many fraudulent companies prey upon borrowers who are struggling to repay their student loans. Getting caught in a student loan scam costs money and puts you at risk of losing access to your accounts. Fortunately, there are several telltale signs of a student loan scam. Continue reading to learn them!
Requests for payment upfront
The first red flag of student loan scams is a request for payment upfront. There is nothing that a debt company can do that you can’t do on your own for free. For example, a student loan scam may claim that, for a fee, it can lower your monthly payments. This is something you can do for free with federal loans by going online and changing your repayment plan. Contact your loan servicer to discuss your loan repayment options for free. Never pay for advice about your student loans–your loan servicer will give you guidance for free.
Here are all the services that the Department of Education performs on federal loans for free:
- Lower monthly payments
- Change your repayment plan
- Consolidate loans
- Postpone monthly payments through deferment or forbearance
- Check if you qualify for loan forgiveness
- Get loans out of default
You should not pay another company for any of these services.
Additionally, you should not pay for assistance with the FAFSA. Your school’s financial aid office and the Department of Education’s FAFSA assistance page offers free FAFSA advice. The DOE also has a free contact center for advice related to the FAFSA and other federal student loan issues.
See also: Scholarships360’s FAFSA 101 Guide
Requests for sensitive information
A legitimate federal or private loan company will never ask for personal information. Nor will a legitimate debt assistance company like the National Foundation for Credit Counseling (NFCC). Scammers may ask for information such as your FSA ID login, credit card number, or your social security number. This information could be used by illegitimate companies to login to your student loan account and make decisions without your permission.
If you have already shared your FSA ID password with a company, be sure to change it as soon as possible. You can also contact the servicer of your federal or private loans to regain access to your account.
A fraudulent company may also ask you to sign over power of attorney so that it can make decisions and communicate with lenders on your behalf. A legitimate debt assistance company would not ask you to do this. Giving a fraudulent company access to your student loan account may cause you to lose your own access.
A representative uses pressure tactics
Fraudulent companies may contact you through phone calls or emails. The content of these communications may include pressure tactics or limited time frames. The Department of Education provides examples of pressure tactics student loan scammers use, such as “act immediately to qualify for student loan forgiveness before the program is discontinued.” Other pressure tactics include requesting immediate payment for services.
Legitimate companies will not contact you in such ways. Remember, you always have time to make careful and knowledgeable decisions about your student loans.
Another thing to look out for in communications from a fraudulent company is spelling and grammatical errors. If there are many cases of improper grammar or incorrect capitalization, it’s likely that the communication is coming from a scam.
The company promises immediate loan forgiveness
There are no programs that can offer immediate student loan forgiveness. Any company that promises immediate student loan forgiveness, especially if it’s in exchange for money, is a scam.
There are legitimate ways to earn student loan forgiveness through federal programs. Students can earn loan forgiveness through Public Service Loan Forgiveness or through an income-driven repayment plan. However, these programs take 10 – 25 years to earn forgiveness.
The company advertises on social media or search engines
Be wary of any debt assistance company that advertises on social media or search engines. Advertisements often mean that the company is in the business for profit. Some advertisements for these companies may ask you to input personal information such as your email or phone number. Beware: these ads might be used to gather and sell this information to other scam companies.
Also read: How to get student loans deferred
Avoid student loan scams!
Over all, be sure to do your research on a company before paying for services or even discussing your situation. Ask yourself if the services offered can be done on your own, or if they’re worth paying for. NerdWallet provides a list of vetted companies that offer legitimate student loan assistance. Remember to do your research and know your options, and you will find the assistance that you need!
Learn more: Do student loans affect credit?