One of the intrinsic aspects of contemporary American life, student loans have now become an industry unto themselves. There are people who write them. There are people who help others find them. And, there are people who help other people when they get into trouble because of them.
Further, there are people within that latter category who thrive upon taking advantage of the woes of others.
Consider these signs of a student loan scam to help you identify them.
- Upfront Fees
Companies charging upfront fees to engage in student loan debt relief on your behalf are operating in violation of the law. It is illegal for companies offering any sort of debt relief to collect fees before they lower or settle debts on your behalf.
This rule applies to the debt relief industry as a whole.
Besides, the truth of the matter is you never have to pay anyone to help you with your student loans. What’s more, anything any student loan debt relief company can legitimately offer to do for you can be done on your own — for free.
The U.S. Department of Education’s federal loan servicers can guide you through the processes required to:
- Lower or cap your monthly federal student loan payment
- Consolidate your federal loans
- Determine if you are eligible for loan forgiveness or other programs
- Get your loans out of default
- Monthly Fees
When you think about it, the imposition of recurring fees makes no sense in this context. What you’re asking for involves one-time assistance in nearly every case. Once your problem is solved, that should be the end of your association with that organization. Anyone suggesting an ongoing relationship for which they will charge monthly fees is likely engaged in unscrupulous behaviors.
- Promise of Immediate Forgiveness
Yes, there are ways to qualify for loan forgiveness. However, all of them require a number of years of engagement in specific actions from you. You’re typically required to work in certain public service capacities and make full monthly payments for 10 years or so to qualify for Public Service Loan Forgiveness.
Further, most public student debt cannot be discharged in bankruptcy. What’s more, as any legitimate company like Freedom Debt Relief will tell you, student loan debt is near impervious to debt relief efforts. Any promise of immediate student loan forgiveness is bogus.
- High Pressure Sign-up Tactics
“You’ll want to sign up for this right away, because the Trump administration is going to discontinue this program within the next month or so.” This approach is known as instilling a FOMO — fear of missing out.
Meanwhile, the fact of the matter is every legitimate loan relief program offered by the Department of Education is always available. Always ask the rep if they’re affiliated with the Dept. of Education and whether you can do what they’re proposing to do on your own for free.
A “no” answer to either of those questions is indicative of a potentially nefarious organization.
- Requests for Sensitive Personal Information
Be wary of anyone asking you to provide your Social Security number or your Federal Student Aid ID number. Ditto requests for bank account information or credit card numbers. You’ll also want to avoid signing power of attorney agreements.
People providing legitimate student loan assistance have no need for this information or capability. Acquiescing to those requests will bare your finances to whatever abuse that person chooses to inflict upon them.
- They’re on the FTC’s Banned List
The Federal Trade Commission (FTC) and other government entities maintain a list of companies against which they have taken action. However, scammers have been known to change the names of their companies and keep operating, so always do your due diligence, even if the company isn’t on the list.
The FTC also maintains a list of list of trusted partners.
These six signs of a student loan scam are the most common ones you’ll encounter. Recognizing these red flags will help you avoid exacerbating your financial problems.