Buzz
Be cautious of any company that requests a fee in return for lowering your student loan payments, handling payments for you, switching repayment plans, consolidating loans, or applying for loan forgiveness, as it’s likely a scam.
‘They’re simply completing the paperwork for you,’ explains student loan expert Mark Kantrowitz. ‘How do you think they gather the information for these forms? By having you fill out their forms.’
The Federal Trade Commission is currently suing companies that falsely claimed to offer debt relief, arguing that they charged illegal fees and failed to meet their promises. The FTC also alleges that these companies imposed a monthly fee throughout the entire loan period, which was meant to go toward repayment but was not used for that purpose.
In an investigation of these questionable practices, NerdWallet found that these companies allowed payments to fall behind, ‘resulting in garnished wages, seized tax refunds, and damaged credit.’
Here's how to identify a scam.
They ask for an upfront fee
‘It’s illegal for companies to charge you before assisting with reducing or eliminating your student loan debt,’ according to the FTC. ‘Companies demanding payment upfront may offer no help and refuse to refund your money.’ This includes debt relief and credit repair agencies and is the most frequent type of relief scam, according to Kantrowitz.
Charging a monthly fee is also suspicious. ‘Assistance with securing or repaying student loans is typically a one-time event, so there’s no valid reason for recurring fees,’ Kantrowitz writes here.
Paying money to save money? That doesn’t quite add up.
They promise fast results
If a company claims they can erase your debt quickly, it's likely a scam. Especially if they haven’t reviewed your case or promise to eliminate it through a loan forgiveness program (particularly if you have private debt). Legitimate forgiveness programs take at least 20 years!
This also applies to companies leaving voicemails, emails, texts, or other messages urging you to ‘act immediately’ to qualify for forgiveness programs before they’re discontinued, or claiming you’re eligible for loan discharge on a ‘first come, first served’ basis. They might even pretend to be from the Department of Education. These are scams too.
They ask for your Federal Student Aid ID
Never. Share. Your. FSA. ID. With. Anyone. It can be used to access all your other personal information from the Department of Education, enabling further scams.
The key takeaway from all of this? Companies claiming they can assist you are not doing anything you can't do on your own, for free. If you have federal loans, call the Federal Student Aid Information Center at 1-800-433-3243 or visit StudentLoans.gov, and they’ll help you lower your monthly payments, consolidate your loans, check if you qualify for loan forgiveness, or assist you with getting out of default.
If you have private loans, reach out to your lender to see if there are options to extend your payments or reduce your interest rate. If you believe you’ve encountered a scam, report it to the FTC.
