Avoiding Student Loan Scams: What to Look For
With billions of dollars loaned to college students every year, there are bound to be some scammers mixed in with legitimate companies that will look to deceive you and take your money. It is wise to do your due diligence before accepting a loan or loan forgiveness from any company. The Federal Student Aid Office has taken steps to educate students on how to avoid scams while searching for scholarships, filling out the FAFSA, and repaying student loans. Here are some things to watch for to help you avoid being scammed.
They Offer to Help You Find Money for College for a Fee
Companies that charge for help to find money for college aren’t fraudulent, per se, but it’s important to remember that there are free options available through the Federal Student Aid Office. For example, it is completely free to file a FAFSA through fafsa.gov; the U.S. Department of Education is not affiliated with any website or corporation that offers to help you fill out the FAFSA for a fee (the application’s acronym is Free Application for Federal Student Aid…emphasis on the word “free.”)
They Require Upfront Payment
When looking to take out a loan, a legitimate company will never require you to pay money up front. Ever. If you encounter a company requiring any kind of up-front payment, whether a flat rate or some percentage of the loan, do not, under any circumstances, proceed to do business with them.
They Offer You a Discount
If you have federal student loans, there are many free programs available to you to help with repayment. It’s important to note that no debt relief company is able to negotiate with federal student loan creditors, meaning a company that promises to do just that is lying to you: federal loans are one type of debt that cannot be forgiven. Requirements, qualifiers, and payment amounts are all set by federal law, and thus cannot be changed by anyone else regardless of what they promise you. The Federal Student Aid Office recommends contacting your loan servicer, which will help you review your payment options for free.
They Offer to Consolidate Your Loan
While consolidation and refinancing are possible once you’ve completed your degree and are preparing to pay back your student loans, be leery of any company offering to help you consolidate for a fee. Federal student loans can be consolidated for free through your loan servicer, and any business charging you for these types of services will likely be helping you refinance your loan, not consolidate.
What’s a loan servicer?
The Federal Student Aid Office defines a loan servicer as “a company that handles the billing and other services on your federal student loan.” Students who receive federal student aid are assigned a loan servicer by the U.S. Department of Education, which works with you to select a repayment plan and loan consolidation and any other tasks related to your federal student loan. In other words, you can trust your loan servicer to give you accurate information regarding your student loan.
They Claim to Be Affiliated with the Department of Education
It’s important to note that no third party has a relationship with the U.S. Department of Education, so anyone claiming they can help you with debt relief because of this relationship is being deceitful.
They Say Your Loan Is Forgiven
No loan company is going to just forgive your loan, no matter who you have working for you. As mentioned above, federal student loans are one of the only types of debt that cannot be forgiven, not even when bankruptcy is declared. Any company saying they can settle your student debt with one lump sum payment that’s smaller than the actual amount you owe, or who tells you for some reason your debt has been forgiven is lying to you. Legitimate information regarding loan forgiveness will only come from your loan servicer.
Who Can You Trust?
With so many scams out there today, it may seem difficult to find an honest and reliable company that can actually help with your loans. Make sure you do sufficient research prior to signing up for a loan with any company or choosing a third party to help with loan repayment. When in doubt, the safest place to go for information is your college’s Financial Aid Office or the Federal Office of Student Aid. With a little help and footwork, you can be sure you’re dealing only with a reputable company that won’t look to take advantage of you.