Student loan scams are dreadfully burdensome. As if the stress of having to deal with student loans was not enough, fraudsters are always trying exploit the situation. Worry not! Here, we’re offering some tips to help you identify these scams.
The sooner you can recognize a student loan forgiveness scam, the sooner you can save yourself from unnecessary hassles, wasted time, and, more importantly, financial loss. We’ve compiled seven warning signs to help you avoid them.
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Seeing Through Student Loan Forgiveness Scams
1. Request for Payment for Loan Forgiveness
Beware of anyone promising to forgive a hefty student loan balance for a comparatively ‘small fee’. Not only could they take your money and vanish, but those loans won’t be going anywhere.
Federal student loan forgiveness programs don’t charge any application fee. If a debt-relief company demands a fee for their service, there’s a good chance they only plan to set you up with an income-driven repayment (IDR) plan or sign you up for the Public Student Loan Forgiveness (PSLF) program—both of which are free services provided by loan servicers.
The takeaway: Stay away from anyone who asks for payment for loan forgiveness.
2. False Representation of a Legitimate Student Loan Company
Be wary of fraudsters claiming to represent the Education Department. Make sure to verify their claims with your loan servicer who is the formal institution responsible for managing your loan.
You can find the official list of loan servicers that the federal government is associated with here.
* Edfinancial
* MOHELA (Missouri Higher Education Loan Authority)
* Aidvantage
* Nelnet
* OSLA (Oklahoma Student Loan Authority) Servicing
* ECSI (Educational Computer Systems, Inc.)
* Default Resolution Group
Always verify the contact information and website URLs of your servicer. Scammers can attempt to impersonate official logos to trick you. If in doubt, don’t hesitate to contact the Federal Student Aid office.
Note that the Federal Student Aid office usually contacts via email or text. Watch out for these:
* Official emails come from noreply@studentaid.gov, noreply@debtrelief.studentaid.gov or ed.gov@public.govdelivery.com.
* Official texts will come from 227722 and 51592.
3. Demand for Your Login Credentials
Beware of any request for personal login information to your student loan account. No legitimate government agency would ever need this.
Protect your Federal Student Aid ID and any other relevant passwords. You may be required to provide your Social Security number when applying for federal student loan forgiveness, but other than that do everything you can to protect it from identity theft!
If you ever compromise your login details, contact your loan servicer immediately and ask for help.
4. Unsolicited Social Media Advertising
Do not trust student loan forgiveness services promoting themselves on social media platforms. This often indicates that they are a for-profit entity and might be seeking to exploit people.
Some fraudsters gather and sell personal data to other companies through social media ads. Stay clear of any ads that ask for additional information or contact via call for “more details”, as they might be leading you on for scams.
5. High-Pressure Tactics
Schemes often exploit desperate borrowers with considerable student loan debts, urging them to act immediately to secure a ‘once-in-a-lifetime student loan forgiveness opportunity’.
Any legit student loan service allows reasonable periods for decision-making and application deadlines. Don’t let anyone pressure you into making rash decisions or prompt payment before you have carefully considered all your options.
6. Demand for Power of Attorney
Signed power of attorney agreements are legally binding documents that can authorize someone else to make financial and legal decisions on your behalf. Abstain from signing such agreements with shady student loan forgiveness companies.
Handing over these powers to malicious entities can have disastrous consequences, leading to your finances, and personal life being disrupted greatly.
7. Unrealistic Promises
The old adage fits perfectly here, ‘if something seems too good to be true, it probably is’. Be cautious of sudden, unsolicited calls speaking of immediate loan forgiveness qualification.
This sudden “qualification” is frequently a fraudulent attempt to scam you. If ever in doubt, confirm with your loan servicer if such a message is authentic or a scam.
Don’t fall for any sudden announcements about Presidential forgiveness plans, as these are typically scams. Any approved changes will be posted on the Federal Student Aid website.
And private student loan forgiveness is typically non-existent. Government forgiveness programs are restricted to federal student loans only. Private lenders rarely (if at all) forgive loans unless necessary. So, don’t trust anyone promising to wipe out your private loans through a government program. It isn’t true!
Reporting a Student Loan Forgiveness Scam
If you suspect that you’ve fallen victim to a scam, contact your federal loan servicer to confirm the safety of your account. Additionally, reach out to your bank straight away to halt any payments made to the scammer.
It’s crucial to report such fraudsters to authorities like the [Consumer Financial Protection Bureau](https://www.consumerfinance.gov/complaint/), the [Federal Trade Commission](https://reportfraud.ftc.gov/#/?orgcode=USEDU), and the [Federal Student Aid office](https://studentaid.gov/feedback-center/). This could potentially prevent others from falling for the same trick.
Avoid Scams: Plan Ahead
Truth be told, the path to student loan forgiveness is far from a shortcut. Even today’s federal loan forgiveness programs may not live up to your expectations. They often fill you with empty promises of future forgiveness, leaving you despondent in the end.
The student loan industry, as a whole, can sometimes feel like one big hoax.
Don’t rely on the government or any other party when it comes to dealing with your student loan debts. Taking matters into your own hands and planning your budget is your first step to gain control of your student loans.
A budget doesn’t just dictate what you do with your money, it also provides a safety net for your student loan payments. Furthermore, it allows you to identify means to expand your payments.
Start managing your loans with EveryDollar’s free budgeting tool. Once you’ve started getting rid of your loans, you’ll be less likely to fall into a scammer’s trap.
The Pathway to Student Loan Freedom
You can also learn more about student loan forgiveness, budget planning for student loan payments, and ways to quickly repay your student loans!
Get the Guide
Frequently Asked Questions
How can I avoid student loan scams?
To avoid falling victim to student loan scams, make sure to never pay upfront fees, never give power of attorney to loan services, and always check if the loan service is registered with the state.
Does the government forgive student loans?
Although the government offers some loan forgiveness programs, they carry specific eligibility requirements and conditions. It’s important to research each program individually to determine your eligibility.
How can I pay off my student loans faster?
Paying off student loans faster involves budgeting your income wisely, making extra loan payments whenever possible, and considering strategies like student loan refinancing or loan forgiveness programs. Always verify the credibility of such tactics.
