With universities and colleges weighing options to conduct classes virtually or in person, students, without a doubt, already have a significant amount of stress regarding the upcoming session.
- Financial aid and loans are such a great source of anxiety. Most students will likely take student loans to finance their education, whether or not the classes are online.
Even the most intelligent people can fall for student loan scams. After all, a proper college education is indeed expensive. Students are frequently left with no other choice but to be burdened with massive student loans that become inescapable financial issues quickly.
Then, immoral and sly companies add salt to the wound by making scams to catch desperate students. You must think again if you think you can’t be fooled. These fraudsters are persuasive in their campaigns!
It’s necessary to separate legitimate enterprises from scam companies so that your money can be better spent on opportunities like studying in prime institutions without much burden.
- To avoid student loan scams, stay away from companies that show up in search engine ads or approach you in some way.
- Even if you get a phone call or a letter from someone who appears to know your student loan details, like how much you owe and other similar things.
- Companies can buy that information about borrowers’ obligations and use it in their marketing efforts. It can very well be a scam.
Also, steer away from any company that pressurizes you to act quickly. They’re trying to get your money before you have enough time to think clearly about it. Do not be gullible; firmly tell them, “No,” and ignore their high-pressure tactics.
1. What is a Student Loan?
A student loan is a sort of loan designed to assist students in covering the costs of post-secondary education, such as admission, courses, supplies, and living expenses. If you seek financial help, your school will almost certainly include student loans in your package.
Federal and private student loans are the two types of student loans available.
The following are examples of federal loans:
- The United States Department of Education (USDOE) issues direct loans.
PLUS loans are federal loans available to graduate and professional students and families of dependent undergraduate students to assist for college or career school.
For example, Federal Perkins Loans, reduced federal student loans for college and university students with exceptional financial need, Federal Family Education Loans (FFEL), where private lending institutions offered loans backed by the federal government, and many more.
Private loans, often known as “alternative loans,” are provided by financial institutions such as banks and credit unions.
- They aren’t backed by the government and therefore do not have the same perks and safeguards as federal student loans.
- They might also ask for a co-signer or someone else who will be responsible for repaying the loan, as well as a review of your credit record.
2. What are the most common forms of Student Loan Scams?
The Scam of Loan Consolidation
Consolidating your student loans after you graduate may be a wise decision. It is yet another area where scammers abound.
- The most prevalent student debt consolidation scam involves a firm charging a consolidation fee but doing nothing in return.
Administrative fees, processing expenses, and consolidation costs are used to describe the price.
There are a lot of providers who will refinance the private student loans, federal student loans, or both if you have one. Refinancing is different from consolidation in that instead of consolidating all of your loans into one, and you take out a new loan with a new lender that pays off your old ones.
- No one can guarantee that all student loans will be forgiven or canceled immediately. Any student loan relief institution may claim to be able to eliminate your debt rapidly.
- Most government forgiveness programs need years of eligible installments and jobs in specific professions before loans are forgiven.
In this case, the borrower is usually told that if they give a substantial quantity to a firm, the business will get their debt dismissed. In some situations, they may instruct the student to pay their student loans directly to the corporation rather than to their student loan supplier.
- In either case, the corporation will likely steal the borrower’s funds, and the borrower will default on their loan. Due to the apparent additional interest and late penalties accrue, they wind up owing even more.
Their credit scores may suffer due to the loan servicer reporting the missed payments to the credit reporting agencies.
Upfront Fee Scam
In this scam, a debt relief organization will entice you by offering to bargain better repayment terms or interest rates on your student loans for you. They might even propose consolidating all your loans so you can provide a single repayment each month.
That is okay if you don’t hear the other part of the story. The thing is, you must pay an upfront fee for all of this. While that organization might deliver its promise, it is also possible to take your money and run.
- You must understand here that whatever a debt relief company can do for a fee, you can do it for free too.
- You can check out loan forgiveness schemes, apply for an income-driven repayment plan, or consolidate if you have a federal loan.
- You must contact your provider to find out about alternative repayment plans if you have a private loan.
Student Loan Scam by a Law Firm
It is a scam in which a law company claims to help you pay off your student loans. There are several versions of this fraud, but typically, a “student aid corporation” refers a borrower to a law firm
- According to the student assistance organization, this law business can resolve your student debt for thousands than that you owe.
This law company often does not make payments while bargaining with your lender, and as a result, you fall back on the student loans. The law company will then allege you cannot pay your debts and attempt to work out an agreement on that basis.
Finally, there’s no guarantee that you’ll be able to pay off your debts. Even if you succeed, the procedure could take many years, and you’ll have to manage the settlement.
As the borrower, what happens to you would be that your credit rating is ruined, and you owe the law firm thousands of dollars.
Inquiring about the personal information
Your account number, date of birth, SSN, FSA ID username or password, location, or account balance will not be requested by the US Department of Education. Neither will your student loan insurer or a commercial collection firm hired by the government. Scammers, on the other hand, will.
They may ask you to validate your details in an attempt to deceive you. That may appear to be a reasonable request: after all, they have to make sure they’re speaking with the borrower, right?
Disengage if you find yourself in this circumstance
Don’t be concerned about being impolite. Stop the conversation right now. Your financial well-being could be jeopardized.
Consider this: If the organization requesting this information contacted you, they would have this information.
3. How to Spot a Student Loan Scam?
A student, debt reduction firm can do nothing for you that you can’t do alone, especially with your loan servicer’s support.
If you’re struggling to make your monthly bills, your lender can work with you at any time to convert to a more reasonable repayment plan at no extra charge.
Your loan servicer represents ED in the repayment of your loan.
- Accumulate your loan payments;
- Answer any concerns you have regarding your loans;
- Assist you in determining the best repayment plan for you;
- And help you in switching to a new program at no cost.
A debt relief firm can do nothing for you that you couldn’t do yourself. It’s also not illegal for businesses to bill for services that could be performed for free. Some people make the comparison between student debt relief and tax preparation.
You’ll be prompted to enter your FSA ID password.
Your FSA ID is being used to sign legally binding papers electronically. It is legally equivalent to a written signature. ED or your loan servicer will not request your FSA ID password.
Give no one your FSA ID password, and don’t let anyone else create one for you.
The salespeople appear to be pushy
You should have been on the defense if you’ve ever been told you have to sign something straight away without first reading the contract or application. For starters, there will not be any “specials” on student loan help programs.
- Suppose you’re looking at refinancing your student loans.
- In that case, you may be eligible for the best interest rate. It has nothing to do with such a limited-time offer but everything to do with the excellent credit rating.
You’re giving a debt relief firm the permission to take further action they want. Make choices for you, and operate on your behalf if you provide this data or sign an Attorney.
You will be responsible for any overdue payments additional accruals. And overdue fines if the debt reduction organization takes money from you but never helps make payments on your behalf.
The firm employs dubious hyperlinks
Scammers can utilize what appear to be official social networking and internet advertising connections, so be wary when engaging on these links. Giving personal details to an online questionnaire that isn’t an application is a bad idea.
- Before replying to any company’s advertisement, do your homework.
Contact your loan servicer for clarification if you have any doubts about the legality of any emails and phone calls you get about your student debt.
- Even if the communication claims to be from the Dept of Education, you need not click on any link given in the questionable message.
If a student loan relief company tries to contact you, check to see if they are on the FTC’s list of blocked or blocklisted companies.
If you’re refinancing, stick to trusted sites and lenders.
Don’t believe anyone who claims to be able to eliminate your student loan debt. Bankruptcy usually allows federal and private student loan payments to be canceled. This type of service is uncommon unless you are in a circumstance that you may never work again.
4. How to Safeguard Against Student Loan Scams?
You must never pay an upfront fee.You won’t have to pay to get student loan debt relief assistance. All the services given by debt relief companies are something you can do independently.
- Remember that reputable companies must not ask for an upfront payment if and when you need help.
You should protect sensitive personal information.The chances of identity theft increase when unwanted people have your details. Know the people who have access to your data and make sure they are trustworthy before handing over your credit card information or social security number to them.
- Always be vigilant when relaying information over the internet or the phone.
Be cautious of false legal claims by companies.Few scams may take advantage of the trust you give corporate professionals instinctively. However, allowing debt relief companies or law firms to negotiate on your behalf cannot guarantee reduced student loans.
- Be extremely cautious about these schemes. They often use legal jargon and convincing emails to persuade you to give them your money.
Beware of claims of lowering payments instead of a feeUnless you qualify for a government loan forgiveness program, total or partial loan cancellation is impossible. Organizations that claim they can negotiate better offers only make it an expensive affair with unnecessary fees.
Be wary of highly aggressive advertising techniques.Legitimate debt relief companies don’t usually have aggressive advertising techniques like junk or spam emails, competitive social media marketing, and cold calls. Don’t feel pressured by impatient sales representatives or any claims of a “limited offer.” You have all the right to make well-informed decisions that involve your debt and seek other opinions or help.
Significantly few companies can help you with student loansLoan holders fall for scams from dishonest companies because most claim to be associated with the government. It would be best if you remembered that only selected organizations are recognized as the government’s official partners when it comes to debt relief.
Reporting fraudulent student debt relief companiesAlways change your ID password straight away if you believe you’ve already been scammed. It would be best to get in touch with your loan servicer and inform them of the scam. And withdraw all power of attorney or any other authorization agreements on your file.
Evaluate your loans and make sure no suspicious activities have been undertaken.Next is to call your credit card company or bank to stop payments directed towards the scamming company. You must file a complaint with the concerned agencies and may even try to get your money back by keeping these groups on observation.
- These scammers can make any borrower’s loan repayment journey hell. You also don’t know what offers will make your financial burden even more exhausting.
Student loan repayment is a significant financial hardship for millions of Americans. If you need assistance, speak with an authorized student loan counselor or the student loan servicer to learn about your choices.
- If your loan repayments are excessively high, for example, you may qualify for a revenue repayment plan.
- If you work for the government, you may be eligible for forgiveness. Don’t be fooled by telemarketers that promise to help you pay down your student loans.
Ignore businesses that approach you or appear in search engine ads if you want to avoid student loan scams.
Even if you receive a letter or a phone call from somebody who looks to be familiar with the specifics of your student loan, including how much you owe, you should ignore it.
- Companies can buy information on borrowers’ obligations and utilize it in their marketing campaigns.
Also, avoid any organization that puts pressure on you to behave hastily. They’re attempting to get your money before you’ve had a chance to take a step back and consider whether or not it’s a good idea. Ignore their high-pressure methods and politely decline.