What are Student Loan Scams?
Student Loan Scams originate from students obtaining loans for education. Such scams have become very common these days. Billions of dollars are being loaned to students every year.
Scammers have also taken part in this big game to scam money from uninformed students. Scammers try to obtain money from students by offering them loan-related services that are actually not real.
Student Loan Scams vary widely. Some look for stealing your sensitive personal information while others try to make money by charging high fees or giving misleading claims.
The Consumer Finance Protection Bureau (CFPB) has issued several warnings related to such loan scams.
Types of Student Loan Scams
The various ways in which scammers trick students for making money are briefed below:
1. It’s too good to be true
If something is too good to be true, it probably is. Some scams say that “you’re pre-qualified for lower loan payments”.
Any company cannot know if you’re qualified for a federal student loan program unless it has assessed your personal financial situation. So, beware of such companies.
2. A Law Firm promises to settle your entire student loan debt
This is a scam where a law firm will claim to settle your student loan debt. Usually, the student is referred to the law firm by a student aid company.
This company promises that this law firm can settle your student loan debt for much less than you actually owe.
However, what actually happens is that this law firm doesn’t make any payments. There is no guarantee that you will be able to settle your loans.
3. A company promises to get your student loan debt eliminated
A very important thing to remember about student loan debt is that in any case, the loan must always be repaid. It cannot be eliminated unless you have a federally qualifying reason such as death, permanent disability, etc. If you find a company that claims to get your debt eliminated, it is a scam!
4. A sales representative forces you into signing up a debt relief service
A salesperson of a student debt relief service may insist you on signing up the service. These companies give you a sense of urgency into signing up the service by saying things like “Sign up before it’s too late!”
There are no such genuine services like that. So, be cautious before signing up such services.
5. You’re asked to share your sensitive personal information
Some companies may ask you to provide your Federal Student Aid ID or Social Security Number. This information provides them the ability to sign into your account and make decisions on your behalf.
Legitimate companies for student loan help do not ask for such information. Employment scams may also originate from such activities.
6. You find advertisements on social media or other places
Some companies use ads to gather personal information of borrowers. They make use of web forms or some other method. These companies then sell the data to student debt relief companies.
7. High, upfront fee is charged for signing up federal repayment or forgiveness programs
There are a lot of companies that charge you fees into signing up loan forgiveness programs. But actually, it doesn’t cost anything to apply for such programs.
8. High-pressure sales tactics are used
Be wary of companies that use sales tactics like, “This offer will expire at the end of the year!” and demand a specific form of payment.
How to report a student loan scam?
If you ever have questions about loan payments, ask your student loan servicer for help.
You can also contact the Education Department, the Consumer Financial Protection Bureau, etc. for guidance.
It’s very likely that you’ll come across student loan scams if you’re researching repayment options for your debt.
If you encounter a fraudulent company, make sure to file complaints with the FTC, the Consumer Finance Protection Bureau (CFPB), and your state attorney general’s office.