Student loan scams have become significantly common with the rise in the number of students looking for viable funding options to support their college education. Hundreds of scammers are charging struggling students excessively in the name of loan relief when, in reality, they only enroll them in federal funding programs that are absolutely free.
Though all private companies are not counterfeits, they are rampant. Over 130 student loan financing companies have records that give borrowers all the reasons to be cautious.
Even if you didn’t receive a typical scam call promising to help you pay off all your student loans, you must have seen such advertisements popping up on websites and various social media platforms. While the United States Department of Education does provide students with debt forgiveness and cancellation programs and other plans to defer or reduce the loan payments, you can apply to all such federal services for free through your student loan servicer. Why pay for assistance when you can get it for free?
Here are four telltale signs that you must look out to avoid falling into the trap of a student loan scam and flushing hundreds of dollars down the drain.
They Ask You to Pay Advance Fee or Monthly Cost for Their Loan Services
It’s legal for a debt relief company to charge you for an education loan financing service if you provide you with non-obligatory quotes to find a loan at comparatively lower rates. However, if they ask you for an advance or monthly fee before settling or lowering the loan, they perform an illegal act. For the most part, there’s nothing they will do that you can’t do on your own. But if they are offering you relief of any sort, they can charge you a certain fee after the service has been provided—not before that.
Your loan service provider serves you on behalf of the U.S. Education Department and can do the following:
- Help you find student loans at low rates.
- Receive loan payments.
- Assist and answer all your queries and concerns regarding loans.
- Help you pick the best repayment plan according to your needs.
- Help with education loan finance through refinancing.
They Promise You Immediate Debt Forgiveness
No company has the authority to offer you immediate loan forgiveness, so be wary of those who promise to do that. A scammer may ask for additional fees claiming to help you do away with your debts in no time. But legitimate federal student forgiveness programs, such as Public Service Loan Forgiveness, may require at least ten years of student loan payments before you qualify for the program.
Some of them also require full-time employment at a government institution or a non-profit charitable organization (or a 501(c)(3) organization). Furthermore, if you choose to go with an income-driven loan repayment plan, it may take 20 to 25 years of qualified payments for you to become eligible for loan forgiveness.
You can visit the studentaid.gov website before applying for a plan to seek information about debt forgiveness and consolidating student loans without paying a dime. If you are seeking education loan financing privately, connect with your loan service provider to discuss the eligible flexible repayment plans. You can also request a short-term pause on your loan payments by applying for forbearance or loan deferment.
You can also use a reliable Private Student Loan Calculator to have an idea about your estimated payments and forgiveness, depending on the type of your education loan finance plan.
If They Ask for You Federal Student Aid (FSA) ID or Password
The U.S. Department of education or an authorized and reliable loan service provider will never ask for your Federal Student Aid ID, social security number, or related sensitive information. A scamming loan service company can use your FSA ID to sign critical legal documents under your name. This confidential ID holds the same status as a personal signature legally.
Suppose you reveal your FSA ID or social security number to a scam student loan servicer. In that case, you’re authorizing them to decide or take any legal action on your behalf. Legitimate education loan finance companies will never ask you to share such sensitive data.
Furthermore, some scam companies might also require you to sign a Power of Attorney that will allow them to connect with your loan provider and make payments on your behalf. However, you’re not legally obligated to sign any such agreements, even if they tell you it is. In fact, signing a Power of Attorney puts you at risk of losing access to your education loan finance account.
If you’ve already done it, communicate the entire situation with your loan provider immediately, and secure control over your student loan account.
False Claims About Being the Only Source of Loan Relief
Debt relief companies that are a scam will claim to be affiliated with the Direct Loan federal programs or the Department of Education when they’re actually not. They’ll further claim to be the only company that can help you with loan relief. If they pressurize you to avail their services “before it’s too late,” and discourage you from using the information available on official federal websites, they are likely a scam, and they don’t want you to find out.
If you want to find out about the legitimacy of a loan relief company, conduct more research before signing up for anything. Ask them if they are affiliated with the U.S. ED and if you need to pay any fees in advance. If they claim false affiliation or demand a fee, know that they’re a scam, turn around and walk away.
Education Loan Finance (ELFI) is a well-reputed lender that can help you graduate from your dream college. Their private student loans will allow comparing rates in a matter of minutes without letting it affect your credit score. Learn more about their loan refinancing options on their website.