There are 10 potential student loan scams to watch out for in the next year.
Be wary of scammers who specifically target students and alumni who are in need of assistance with managing their student loan debt, whether you are a current student looking for assistance with covering school-related expenses or a recent graduate struggling to repay your loans. Of the many online frauds now making the rounds, we’ll be covering the top ten here.
Advance Fee Scams
involve companies that promise to help you lower your student loan payments or even get your loans forgiven but require you to pay a fee upfront. Once you pay the fee, the company disappears, leaving you with no help and no refund.
Phishing Scams
These scams involve fraudsters who send emails or texts that appear to be from legitimate organisations, such as the Department of Education, asking for personal information or directing you to a fake website where you’re prompted to enter your personal information.
Debt Relief Scams
These scams involve companies that claim they can help you lower your student loan payments or even get your loans forgiven, but the only thing they do is take your money and run.
Consolidation Scams
These scams involve companies that offer to consolidate your student loans for you but charge you high fees and may not even help you lower your payments.
Scholarship Scams involve companies that promise to help you find scholarships or grants but only take your money and provide no real assistance.
- Co-Signer Scams involve companies that promise to help you find a co-signer for your student loan but only take your money and provide no real assistance.
- Forgiveness Scams: These scams involve companies that promise to help you get your student loans forgiven but only take your money and provide no real assistance.
- Refinancing Scams involve companies that promise to help you refinance your student loans but charge you high fees and may not even help you lower your payments.
- Impersonation Scams: These scams involve fraudsters who impersonate government officials or representatives from legitimate organisations to trick you into providing personal information or paying a fee.
Income-Driven Repayment Scams
These scams involve companies that promise to help you enrol in an income-driven repayment plan but only take your money and provide no real assistance.
It is important to note that these scams are not limited to these types, and new ones can emerge at any time, so it’s crucial always to be vigilant and do your research before working with any company or individual regarding your student loans. Additionally, it is important to note that the U.S. Department of Education and its loan servicers will never ask for your Federal Student Aid (FSA) ID or Social Security number over the phone or through email. If you have any doubts about the legitimacy of a company or individual, contact the Department of Education or the Consumer Financial Protection Bureau (CFPB) for help.
The Student Loan Negotiator Scam
Debt from a student loan is different than debt from a credit card. Forbes reports that whereas credit card debt sold off for nonpayment can be negotiated with a debt collection agency, student loan debt is non-negotiable.
The government will expect you to repay $20,000 if you owe that much in student loans (that is, unless your loans qualify for cancellation or forgiveness). However, you should stay well away from any businesses that claim they can negotiate your student loans for you. It’s just not possible to pull off.
The Up Front Fee Scam
Many credible sources, including the U.S. Department of Education and academic institutions’ websites, provide extensive amounts of free online material. The Federal Trade Commission considers it fraud if a business contacts you via phone or email and demands payment before offering any assistance. The Federal Trade Commission cautions, “You may not get any aid, or your money back, if you pay an up front fee to decrease or eliminate your student loan debt.”
The Biden Loan Student Loan Forgiveness Scam
Unfortunately, Joe Biden has not yet announced that he will forgive all student debt. Although Biden has granted the wish of many Americans by extending the moratorium on new student loan payments until May 1, 2022, he is not extending any student loan forgiveness programmes. Don’t walk, run away from any organisation that contacts you about a “Biden student loan forgiveness option.”
Scammers are taking advantage of consumers who are desperate to get back on track with their student loan payments despite the fact that the Biden administration has chosen to extend the payment pause date until May 1, 2022. The Federal Trade Commission warns consumers to beware of any company promising to cancel student loan debt.
Avoid companies who claim they can help you join in a student loan forgiveness programme or “get rid of your loans” before they have a full understanding of your financial circumstances. Certain types of federal student loans are eligible for forgiveness, and you must meet certain criteria before any of your outstanding loan balance is written off.
The CARES (Coronavirus Aid, Relief, and Economic Security Act) Act Loan Forgiveness programme is another false scheme that scammers are using to try to get your personal information, such as your FSA ID, your Social Security number, or your bank account. The reality is that there is no such programme, and if you want to have any or all of your student loans forgiven, you will have to apply for federal aid through the U.S. Department of Education.
It’s easy to fall for one of the many scams that seem to specifically target college students when they’re in a financial crunch and need quick cash to meet tuition and other school-related costs. Those who are struggling to make payments on their student loans are in the same boat. If you find yourself in a bind and tempted to give personal information or financial resources to a company you haven’t thoroughly investigated, remember the advice above.