Student Loan Scams
Student loans are offered to financially assist those who may not be able to afford to pay for college courses and textbooks out of pocket. Unfortunately, there are scammers that prey on those that rely on these funds to further their education. They will bait consumers with fraudulent offers to defer, lower, consolidate or eliminate their debt. We are here to help you identify potential student loan scams and understand ways to protect yourself from falling victim.
Types of Student Loan Scams
The most common types of student loan scams typically involve debt relief or loan consolidation, but scammers are constantly finding new ways to get your financial information. Here are a few student loan scams to be on the lookout for:
- Student Loan Consolidation Scams: Although loan consolidation is a legitimate method of paying down student loan debt, scammers will take advantage of this tool to fit their scheme. Often they will require money upfront that is disguised as processing fees to consolidate your student loans.
- Student Loan Debt Relief Scams: If a company promises you that they can eliminate or reduce your student loan debt, use caution. Student loan debt generally cannot be eliminated or forgiven, aside from special exceptions – including death, permanent disability, identity theft, federal loan forgiveness plans, and income-based repayment plans. You don’t need to hire someone to take advantage of these programs – you can set them up yourself for free through the Department of Education.
- Advanced Fee Scam: This scam involves a student loan company that tells you they can get you the “best” interest rate and loan terms, but you are required to pay a small fee up front for this service. There are no circumstances in which you should have to pay money to get money. Legitimate student loans don’t require any fees up front.
How to Spot Student Loan Scams
Knowing the warning signs of a potentially harmful company can save consumers hundreds of dollars in unnecessary fees. Staying alert for these red flags will help protect you from falling victim to student loan scams:
- You have to pay up front or monthly fees to get help – Although it’s not illegal for companies to charge for services you could do for free, it is illegal for companies offering student debt relief to collect fees before they lower or settle a customer’s loans. It’s better to contact your lender directly to try and negotiate your loans. Never give financial information to a company you’re unfamiliar with.
- The company promises immediate loan forgiveness – While there are legitimate government programs that can reduce or eliminate federal student loans, it takes time and only some individuals qualify for these programs. Don’t trust a company that promises instant loan forgiveness.
- A salesperson pressures you into signing up – Companies selling student debt relief services are typically staffed by sales representatives who earn commissions based on the number of customers they sign up. They may instill a sense of urgency by saying things like “sign up now before it’s too late!” There are no legitimate loan programs that are available only for short periods of time, so take that time to make careful, well-researched decisions about your debt.
College can be stressful enough without the extra worries of being scammed by fraudulent student loan relief companies. If you’re struggling with your student loan debt, first speak with your servicer or lender to discuss repayment options, take a temporary payment pause, or temporarily reduce your monthly payments. The last thing you want is to fall victim to a student loan scam and end up in a deeper financial hole. To learn more about how we strive to protect our members, visit our Security and Fraud page on our website.
At Robins Financial Credit Union, our mission is to enhance the financial well-being of our members and community. We honor this commitment by providing educational content to help you make the most of your finances. Read our other blog articles to help you gain the financial knowledge you need to succeed.