They require upfront payment: Student loan companies and other paperwork companies cannot charge fees for debt relief services before they provide the services promised. If they demand payment upfront, the company is fraud. Kantrowitz states that the government regards them as credit repair companies and can shut down any company that charges upfront fees.
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They make high-pressure sales pitches: Companies will pressure you to hand over your credit card and personal information in a hurry so that you have no time to research them. Tayne says that if you are stressed about the urgency of an offer to make you fear missing out, it is a red flag.
They ask you for your FSAID: Legitimate loan servicers won’t ask for it. It’s a sign that the company is a fraud if they ask for it.
You can’t verify their affiliation with the government by using their logos. Many companies have been in trouble with the FTC for using logos from the government or giving the impression that they are affiliated with the Department of Education. Kantrowitz says that only a few organizations have been contracted to the Department of Education. “And none are involved in such a thing.”
It sounds too good to be true: Loan forgiveness programs and reduced payments can sound like a blessing when you are struggling with your debt. It’s true that if something sounds too good to be true it probably is. It is possible to pay off student loans, but it is not always easy. There are no loopholes.
How to Avoid Scams with Student Loans
You now have a better understanding of some of the most prevalent student loan scams and what to look out for. These are just a few more ways to avoid falling for scams.
- For any questions, contact the Federal Student Aid Information Center
You can contact the Federal Student Aid Information Center, which is a contractor for the Department of Education. Kantrowitz says it’s a great resource for information about federal student aid and FAFSA.
You can reach the Federal Student Aid Information Center at 800-433-3243, or by chat.
- For any questions, reach out to your loan servicer
After your loan has been paid off, your loan servicer will manage them. Your servicer is the person you pay your loans and who you contact if there are any questions about your debt. Are you unsure who your servicer might be?
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- Ask your Financial Aid Administrator for assistance
Don’t be afraid to ask your college’s financial aid officer if you’re unsure if it’s a scam.
Kantrowitz says, “Ask your financial assistance administrator to look into it.” They are usually willing to help, even if you have graduated years ago.
The financial aid staff is usually up-to-date on student loan programs so they might be able help you.
- To manage your loans, visit StudentAid.Gov
Official website of the U.S. government is Federal Student Aid at studentaid.gov. This website provides a wealth information and resources about your loans, the repayment options available, forgiveness requirements and what to do if your payments are not being made.
You can get Studentaid.gov to do the following tasks free of charge:
You can apply for Income-Driven Repayment Plans (IDR) plans if your current federal loan payments are too high. These plans will extend the loan term and limit your monthly payments to a certain percentage of your discretionary income.
Consolidate your Loans: You can consolidate multiple federal student loans and get a shorter repayment term with a Direct Consolidation loan.
Online Application for Loan Forgiveness You can also use the PSLF Tool to determine if your loan or employer is eligible for forgiveness.
You may be eligible for loan deferment or loan forbearance if you are going to school again, have a financial emergency or are seriously ill. You can temporarily defer your payments if you are eligible. You can access the necessary forms online and send them to your loan servicer.
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What to do if you’ve been a victim of student loan scams
You can file a complaint against the company if you have been victim to a scammer and seek compensation.
Contact your bank or credit union: If you have given your bank information or credit card number to a company, get in touch with your card issuer immediately. They might be able reverse the charges or to freeze your account to stop the transaction.
You can change your FSA ID immediately by going to the FSA website. Contact the Federal Student Aid Information Center immediately if you discover that you have been locked out.
Contact your loan servicing company: If you have signed a power of attorney or third-party authorization form, please contact your loan servicing agency to get it removed.
Put a credit freeze in place: This will prevent scammers from opening new credit lines to your name. Online credit freezes can be set up with Equifax, Experian and TransUnion.
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You can file a complaint to the FTC or consumer financial protection bureau (CFPB). After you have taken all necessary precautions to protect yourself, you can file a complaint with both the FTC/CFPB. You can submit your complaints at ReportFraud.FTC.gov and ConsumerFinance.gov/Complaint. You may not be eligible to recover your losses. Tayne says that the FTC has won lawsuits against fraud companies and distributed settlements to victims of scams, so there might be hope.