Unfortunately, scammers are everywhere and they know that those who take out student loans are generally struggling to get by.That’s why they tell you that you can get your loan forgiven according to new laws and then they take your money in order to do it. Some of them may charge you fees for a program that’s actually entire free if you knew what you were doing.
How Does It Work?
A student loan debt relief company is one that is a private company and says they’re going to help you manage your loans.
Of course, they’re going to charge you for this service and the things they’re going to do aren’t anything special. You could do them yourself and not pay anything at all. But they’ll claim they can reduce your payment or even get you loan forgiveness, but only if you pay them. And then, once you do pay them, you might not get what you paid for. They also might make alterations to your student loans that you don’t even want or need. And you could be left with the problems.
What happens is that they know you’re looking for companies affiliated with the U.S. Department of Education and they claim to be just that. But they’re definitely not in any way affiliated. They don’t have anything to do with consumer advocacy groups either.
Just think of it this way, if you’re being asked to pay money to get the help then you’re not getting help from the U.S. Department of Education. They never charge fees to borrowers to help them with student loans.
Now, that doesn’t mean there’s no one that can help you legitimately. There are definitely places that can do something about lowering your payments and help you with debt relief, but if you’re looking at your options you need to be very careful. There are all different kinds of scams, after all, and they are very good at getting you to give them the information they want.
This is what you should be paying attention to:
1. Student Loan Consolidation Scams
Many college students end up with multiple student loans and the idea of refinancing them or consolidating them might sound like a great idea. You would only need to make a single payment every month instead of paying multiple ones and you might have a lower monthly payment. What you need to do, however, is look for someone who is going to do it in the right way. You don’t want to find yourself stuck with a lender that’s not reputable, because it happens far too often.
Because those scammers know that college students are always looking for a way to consolidate loans they use this as a way to get to you. They offer to help you consolidate your loan and they get a fee to help you do it. But remember, the federal government will help you do this entirely for free.
2. Charges Upfront Scams
You want to be able to get your loans for the lowest interest rate possible and that generally means doing some research, but that takes time. A scammer will let you know that they can find you the lowest interest rates and all you have to do is pay them about 1-5% of your total loan amount upfront.
If you’re working with a true, reputable lender, you’re not going to be charged a fee before you actually get anything.
You may have to pay to the private student loan company, if you have one of those, but you shouldn’t have to pay any kind of fee upfront.
If you’re paying someone to fill out your application you shouldn’t do it until after you’ve gotten the results.
3. “Relief” for Student Lenders
There are all kinds of scams going around related to student loan relief and even credit-repair. These services will charge you fees just to apply for things like student loan forgiveness or lower monthly payments. They tend to look great because they’re offering you huge savings, even half off discounts on your loans.
You might even get an offer to completely eliminate your student loan debt, but of course, it’s going to cost you something. It’s definitely easy to get sucked in, but you’re not going to get what they’re actually promising you. There’s a huge process involved for loan forgiveness and if they’re promising to get it done fast … it’s just not going to happen.
What they’re saying is that they’re going to take care of everything for you, and they’re going to charge you for the convenience. But everything is available for you right at StudentLoans.gov and it’s already entirely free. You can apply for anything that you want within a few minutes and be ready to move on.
Any kind of service that charges you for credit repair services before you actually get anything done is illegal as well.
There are state attorneys general and the Federal Trade Commission going after these people to make sure they’re not scamming students who are just trying to get back on their feet.
4. Student Loan Debt “Elimination”
You’ll see all kinds of scams that say they can completely eliminate your student loans. They say that if you pay them a small fee you won’t have to worry about anything at all. But this is most definitely a scam, every time.
You can get your loan eliminated in some instances and we’re not denying that, but you’re not going to get it through these scam services. If you have a permanent disability, you have identity theft or your school closes you may be eligible to get your debt eliminated, but there are certain rules, and applying for the forgiveness is free.
There are definitely ways that you can get your debt forgiven, but these scammers don’t even care about those. They tell you they can get your debt eliminated just because you went to a certain school, for example.
How Federal Loan Borrowers are Targeted?
Many students report getting calls, emails and letters and even texts that talk about student loan forgiveness. Some have seen ads on TV or online. Some companies are even able to give you information about the exact amount of your loan. That doesn’t mean that they’re legitimate though and they should not be trusted unless they come directly from the U.S. Department of Education.
How to Identify Student Loan Scams?
There are some different features that you can always watch for when it comes to scammers. Watch for each of these and you’ll probably know if you’re getting pulled in where you shouldn’t be.
- Charging Upfront – If you’re being charged for debt relief help before they even do anything at all you’re likely being scammed in some way.
- Being Aggressive – The way these people make money is by scaring you into doing something right now, without actually looking into the details.
- Asking for Private Information – Never give your student aid ID or your social security number to anyone who calls you to help with your student loans.
- Offering Student Loan Forgiveness – If they’re just flat-out offering to eliminate your student loans then you’re definitely being scammed. No one can make that promise.
- Posting Ads – Since federal loan consolidation or repayment plans are free to apply for they’re not going to spend a lot of money advertising on Google or Facebook.
- Using Grammatical Errors – The federal government is unlikely to send out information to you with a lot of spelling errors or grammatical errors. But people who are trying to scam you might.
- Creating a Fancy Company – A lot of private companies want to sound professional and high end so you’ll actually use them. That’s where they create a company name that likely sounds a little pretentious.
Recovering From a Scam
If you’ve already been scammed and you’ve already given someone private information or you’ve already paid them a fee then you absolutely need to follow these important steps.
- Change your FSA ID number immediately.
- Call your loan servicer to notify them and make sure no one but you is authorized to make changes to your account.
- Call your bank or your credit card company or whoever owns the method of payment you used to stop payments.
- Contact the FTC to file a complaint.
- Contact the Federal Student Aid Feedback System to report the activity.
If you’re looking to consolidate or pay off your student loans you want to stay away from the scammers.
That means staying away from those who want you pay them upfront or who want to charge you for anything to do with your federal loans. Changing your federal loans is completely free.
If you’re not sure what you should be doing about your loans you can absolutely contact the federal government, including the U.S. Department of Education, or your loan service provider to find out more about the options available to you. They can even walk you through things like loan consolidation and repayment plans and how to change your current set-up.