The age-old scam saying also holds true for Student Loan Repayment Plans: If it sounds too good to be true, then it is. Some of common scams may include terms like “instant forgiveness” or that you are “pre-qualified” for lower loan payment. A company can’t and will not know if you’re qualified for a student loan program, such as income-based repayment (IBR) or public service student loan forgiveness. They will have had to assess your student loans and your personal financial situation before being able to give you advice. You need to be on the watch for any broad or blanket guarantees that a company will be able get you a particular outcome. The process and the programs are really not that simple.
There are a handful of legitimate ways you can make your student loan payments more affordable. But it is also very likely you’ll come across student loan scams if you are researching repayment plans and options. These scams can vary widely. Some are simply looking to steal your personal or financial information. Then there are others are trying to profit from high fees or misleading claims.
Here Are 5 Red Flags You Need To Watch Out For:
1. To Get Help, You Are Required To Pay Upfront
Right off the bat, let’s get one thing very clear There is nothing a debt relief company can do that you are not able to do on your own. And, it’s not fundamentally wrong for a company to charge for services you actually could do for free. Student relief services are often compared to tax preparation services in that we could do it ourselves, but choose not to. However, it is illegal for a company offering student debt relief to collect fees over the phone before they perform their service to lower or settle a customer’s loans.
Instead, you can go to studentloans.gov to apply for an income-driven repayment plan. You can also learn about government forgiveness plans or consolidate your federal loans, and do this for free. If you have private loans, contact your lender or servicer to discuss alternative repayment plans. Borrowers with a federal or private loan can also request a temporary suspension on payments by requesting a forbearance or a deferment. If you choose to go in this direction, the interest will continue to accrue, which also increases your loan balance.
If you want expert assistance in handing and choosing your options, you can contact a student loan counselor that is certified by the National Foundation for Credit Counseling. Some of nonprofit credit counseling agencies may charge a one-time fee. But they offer you trustworthy advice for a fraction of the cost that you would pay to a for-profit company
2. The Company Will Promise You Immediate Loan Forgiveness
Be very suspicious of companies that will claim to help you get loan forgiveness. For example, Obama Student Loan Forgiveness Programs do not actually exist. There are legitimate programs that can reduce or eliminate federal student loans after a certain amount of time. One of those is the Public Service Loan Forgiveness program, however, only some individuals qualify for the programs. Borrowers on income driven repayment plans can possibly get their remaining loans forgiven after they have made payments for 20 or 25 years, depending on their actual plan.
The important thing that you need to remember about student loan debt is that it will always have to be repaid. It can’t and won’t be eliminated unless you have a federally qualifying reason. Some of those reasons are death, permanent disability, school closure, identity theft, or falsification of documents If you find a company that is promising you to get your student loan debt eliminated, it is a scam!
3. The Salesperson Pressures You Into Signing Up
Companies that are selling student debt relief services are typically staffed by sales representatives. These sales representatives earn commissions based on the number of new customers that they sign up. They may attempt to instill a sense of urgency by saying things like, “You need to sign up now before it’s too late!”
There are no legitimate loan programs that are available only for short periods of time. But you do have time to make careful, well-researched decisions about your debt.
You can also ask the company some questions like:
- Are you affiliated with the Department of Education?
- Can I do this on my own for free?
- What will refinancing cost me?
Fraudulent student loan relief companies have been known to deceive borrowers by faking their relationship with the Department of Education. Honest companies will tell you upfront that they’re not associated with the department. They also are required to tell you that you can apply for the help you need and not have to pay for it.
4. You’re asked to share sensitive personal information
Some companies will ask for borrowers to provide their Federal Student Aid IDs or their Social Security numbers. The information will give the businesses the ability to sign in to your account and then make decisions on your behalf. Legitimate sources of student loan assistance, such as nonprofit credit counseling agencies affiliated with the NFCC, will not ask for such information.
In addition, some debt relief companies might ask borrowers to sign a power of attorney agreement. This would allow the business to communicate with your loan servicer on you behalf. You’re not required to sign any such document. In fact, if you do so, it could cause you to lose access to your student loan account.
Don’t ever reveal your FSA ID or Social Security number, or sign any power of attorney agreement. If you have already done so, you need to contact your loan servicer immediately. You will need to explain the situation to regain control of your account. Then, resume making payments directly to your loan servicer if you had stopped doing so.
5. The Company Shows Up In Search Engine Ads Or Advertises On Social Media
Student Loan customer should look at student loan assistance companies that pay to advertise their services with skepticism and suspicion. It usually means that they are in the business for a profit. And, as mentioned earlier, you don’t ever have to pay to consolidate your federal loans or to switch repayment plans. This is a sign that the services they offer could be a scheme or plan to mislead you into paying for what is otherwise free assistance. Again, if you realize these facts, you may still opt to pay a reputable student loan repayment company for their services. Just be forewarned and forearmed.
Why You Need to Be Careful With Student Loan Repayment
Paying your student loans on time can help you build credit or can help you maintain your good credit. But if you fall behind on your payments or you don’t understand how repayment works, you could possibly end up with some serious credit problems and general financial problems. If you ever have questions about your student loan payments or programs, you can contact your student loan servicer for assistance. The Department of Education, the Consumer Financial Protection Bureau and local consumer advocates, can also be good sources.
How To Report A Student Loan Scam
If you think you have been a victim of a Student Loan Repayment Scam, you can file a complaint with the CFPB, the FTC, and your state attorney general’s office. These agencies rely on consumer complaints to help control harmful student loan companies. Sometimes, it is actually possible to get borrowers’ money back. Student debt relief companies have cropped up all over and have grown because filling out the necessary paperwork can be complicated and time-consuming. You just need to arm yourself with the right information. Then you will know how to ask the government for free help and you won’t potentially lose your hard earned money on a scam where you could be paying off your education debt instead.
Thanks for reading this post on Student Loan Repayment Scams. I hope it has been of some service to you or someone you know. Please feel free to pass it on to someone that may need the assistance. Feel free to leave comments or questions below. Also, if you know of any scams that need to be exposed, leave the info in the Comments section and I will be glad to investigate. Take care.