Student loan forgiveness scams have been around for a long time. Repaying your student loans may be a stressful, confusing, and daunting process. There has been an uptick in student loan debt reduction scams as more former students are grappling with mounting debt. Many of these schemes prey on customers by
- offering fraudulent services
- and demanding exorbitant costs for debt consolidations
that are available for no fee through federal government programs.
Borrowers will be targeted by student loan forgiveness scams via the internet marketing, social media, phone calls, and even mail delivered to their homes. The Federal Trade Commission initiated a campaign to target fraudsters in the United States in 2017. While the government crackdown was beneficial, bogus student debt forgiveness schemes persisted.
By 2022, the total amount of outstanding student loan debt will have risen to $1.7 trillion. And, because the epidemic has impacted so many people financially, the number of people seeking to get out from under the weight of school loans is only going to increase.
Here are the worst 4 student loan forgiveness scams to avoid in 2022:
1. Scam of consolidating student loans
Consolidating your student debts can make sense in some cases, but if you have federal loans, you can combine them for free on the Federal Student Aid website. If you have private student loans or a combination of private and federal loans, you may be able to consolidate them.
Many student loan forgiveness scams charge a cost for combining services, which is sometimes referred to as a processing fee. It’s also known as an administration charge or a consolidation cost. Don’t get caught up in the trap of paying for something you could do for free. Avoid these fee-based rip-offs.
Be mindful of how consolidation can affect your repayment schedules for student loans. Before you consolidate, a trustworthy organization will make sure you understand what you’re getting into.
It’s also crucial to remember that student loan consolidation might reset your eligible payments count if you’re pursuing student debt forgiveness.
2. Scam to get rid of student loan debt
It’s a fallacy that you can pay off your school loans quickly. Use carefully if a firm claims to be able to remove or lessen your student loan debt. Except in rare circumstances, such as
- permanent disability
- identity theft
Student loan debt cannot be canceled or forgiven. You don’t need to employ someone to take advantage of these programs. The Department of Education will set them up for you for free.
3. Scam of advance fees
It is one of the most common characteristics of student loan forgiveness scams. Student loan debtors can make use of a number of free services provided by the federal government. Scammers, on the other hand, frequently claim that if you pay a modest charge up the advance, they would be able to negotiate lower interest rates or better loan conditions (spoiler: the price is almost always not tiny).
Fees are occasionally associated with student loans, both government and private. The problem with this scam is that the fraudster charges you a fee in advance before delivering any assistance.
That’s not how it’s intended to work with student loans. For example, origination costs for federal loans are applied to the overall loan amount rather than being charged separately in advance. In addition, if you fail on your loan, you will be charged a fee.
An origination fee or a disbursement fee is generally charged on private loans. This cost, however, is applied to the overall loan amount. In general, be wary of anyone who tries to charge you in advance for a service linked to using government services.
4. Scam lawsuit
A law business promises to be able to settle your whole student loan debt in this fraud. The lawyer will want the payment to handle this for you, claiming that it will save you thousands of dollars in the process.
These individuals may even urge you to send them your monthly payments under the guise of negotiating settlements with your loan servicer.
But, more frequently than not, the legal firm does not pay the federal loan servicers. Those loans are placed in default. Once your loan has gone into default, the legal firm will claim that you are unable to make payments and then engage with your lender to reach an agreement based on that falsehood. It’s sad that legal firms engage in this behavior. People, on the other hand, are so anxious to get out of student loan debt that they want to think these fast remedies are true.
Attempting to settle your loan debt in this manner might result in legal expenses costing you thousands of dollars. You’ll also have squandered a lot of time that could have been better spent paying off your debts in the correct, legal manner.
What methods do scammers employ?
For a price, a fraudster may promise to help you combine your debts, suspend your payments, or amend your repayment schedule. You can get this assistance for free by contacting your service provider.
Scammers may not even ask for money, preferring to get personal data such as your social security number, Federal Student Aid password, or bank routing information.
Be wary of these calls and emails since they may look to be authentic. Scammers may utilize titles that appear to be authentic, agency numbers, and, in certain circumstances, information about your student loan debt. Even if someone knows how much money you owe, don’t assume they’re trustworthy – the information might have been obtained unlawfully.
They may emphasize the urgency of their request by stating that their program is first-come, first-served. This does not apply to forgiveness programs run by the federal government. What are the red flags that a student loan debt reduction fraud is taking place?
To begin, maintain a healthy level of skepticism. Remember that if anything appears to be too good to be true, it nearly usually is. Anyone who offers absolute loan forgiveness or guarantees quick loan forgiveness should be avoided at all costs. Most debt forgiveness programs require a particular amount of payback or a certain number of years of working in your chosen industry, and you should discuss your possibilities with your loan servicer immediately.
You must pay the fees beforehand:
Any fees charged by a student debt reduction firm before a settlement or before providing a service are prohibited. While some unusual circumstances may need the use of legal counsel or private financial advice, you are not obligated to pay anybody for student debt relief until the task is completed. If someone asks you to pay a charge before starting the procedure, they are most likely not a real company.
Furthermore, while it is completely legal to pay for assistance with your repayment, just as it is with other sorts of financial counseling, you will never have to pay to use federal services. Borrowers may complete all of the documentation necessary for an income-based or federal consolidation plan on their own for free. Even if you don’t want to deal with the trouble, there are a number of organizations that can help debtors with assistance.
The company’s name contains the terms “federal,” “national,” or other official-sounding phrases, or it claims to have a government affiliation. Borrowers may mistakenly believe that private firms are linked with the government based on their titles, but in reality, the companies are distinct organizations that charge fees for services that the government provides for free. In order to deceive consumers into paying fees for free federal program advantages, scam organizations may fraudulently indicate that they are linked with the federal government based on their logos and even their internet addresses. It’s probably a fraud if a firm claims to have a unique relationship with the government or the Department of Education.
You will be required to submit your Federal Student Aid PIN (Federal Student Aid PIN):
Borrowers should not share their four-digit PIN with outsiders, according to the US Department of Education. If you provide a student debt relief firm with this information, the company may make changes to your account that you don’t want, such as sending future notices to it rather than you. These adjustments may result in issues, such as debt default.
Relief right away:
You are promised instant relief, loan forgiveness, or that the corporation would get you out of default in this scenario. Ads that promise unachievable services such as 100% loan forgiveness or fast loan reduction should be avoided. When it’s time to combine your student loans or transfer repayment plans, stay away from websites that don’t end in “.gov” or don’t belong to one of the government’s recognized loan servicers.
Want to speak with your loan servicer directly:
In the process of student loan forgiveness scams, they will frequently demand that you sign a power of attorney or third-party permission before they can speak with your loan servicer, make decisions, or make payments on your behalf. Allowing another firm to stand between you and your loan servicer for student debt relief is almost never a smart idea.
What should you do if you’ve been scammed?
- Contact your attorney general’s office if you’ve already paid money to a firm that makes deceptive claims regarding student loan relief.
- You can also go to the Federal Trade Commission and register a complaint. It’s especially crucial to report student loan forgiveness scams that target many people or that utilize fictitious names or websites that appear to be authentic.
- You’re under a lot of stress.
- Finally, student loan forgiveness scams may try to persuade you to act without thinking by using high-pressure sales methods.
- However, there should be no feeling of a rush when it comes to requesting loan forgiveness. Learning the ins and outs of genuine software and making sure you’re meeting its criteria takes time. Take some additional time to complete your own independent research if you’re feeling pressed to make a decision.
- It’s also a good idea to alert your friends and family about these frauds. You can do it by posting this information on social media.
You might also:
- Change your ID and password by logging into your FSA account.
- Reverse any third-party authorization you’ve given, or that has been added to your account by contacting your loan servicer.
- If you’ve submitted any financial account information, contact your bank or credit card issuer to cancel your account. Then, create a new one.
How to Avoid Student Loans Forgiveness Scams
You’ve probably seen advertisements for firms that claim to be able to assist you with your student loan debt. However, keep in mind that there isn’t much a student loan debt reduction firm can do for you that you couldn’t do for yourself for free. Some of the firms that claim to be able to help you are really frauds.
Here are some strategies to prevent being scammed into paying off your student loans:
- Never pay a charge upfront. It is against the law for businesses to charge you before assisting you. You could not get any aid — or your money back — if you pay upfront to minimize or eliminate your student loan debt.
- Don’t agree to a rapid loan forgiveness program. Student loan forgiveness scams may claim they can get rid of your loans before they know the intricacies of your condition. You’ve probably seen advertisements for firms that claim to be able to assist you with your student loan debt. However, keep in mind that there isn’t much a student loan debt reduction firm can do for you that you couldn’t do for yourself for free. Some of the firms that claim to be able to help you are really frauds.
- A Department of Education seal isn’t to be trusted. Scammers employ names, seals, and emblems that appear to be legitimate. They offer early access to repayment plans, new federal loan consolidations, and loan forgiveness. It’s a fabrication. If you have federal loans, go to StudentAid.gov to contact the Department of Education directly.
- Don’t be in a hurry. Student loan forgiveness scams claim that if you don’t sign up immediately away, you can miss out on repayment options, debt consolidation, or loan forgiveness programs. Take your time and go through everything.
- Don’t give your FSA ID to anyone. Scammers may pretend that they want your FSA ID in order to assist you. Never give out your FSA ID to anyone. That information might be used by dishonest persons to get access to your account and steal your identity.
Why does real student loan forgiveness take so long?
While there are real student loan forgiveness programs available, none of them can completely eliminate your debt. In actuality, debt forgiveness is a time-consuming process that only applies in limited situations.
It’s also only accessible for federal student loans; there’s no forgiveness for private student loans. It might be one of the student loan forgiveness scams if someone promises to cancel your debt with a private lender.
Student loan forgiveness scams take advantage of the borrower’s lack of knowledge about how their loans and loan forgiveness programs function. Pay attention to
- or phone calls
that over-promise their capacity to cut your monthly payments. Avoid falling into a scammer’s trap, contact your loan servicer immediately if you have any doubts.
Be sure you do your homework about both requirements of your student loans and student loan forgiveness scams. It’s difficult to con someone who understands their debts and repayment choices. While there are no shortcuts to student debt forgiveness, the federal government’s programs can assist you in repaying your loans if you meet specific criteria. However, it’s crucial to realize that you don’t have to spend anything to apply for debt forgiveness or income-driven repayment plans. You don’t have to go through a third party to do so. If you’d like to learn more about those possibilities, contact your loan servicer.