Are you buried in student debt? You’re not alone. Figuring out how to repay your student loans can be stressful and intimidating. To develop the optimal repayment plan, enlisting the services of a student loan adviser can be very beneficial.
They can help you understand the complicated aspects of student loans and develop an effective repayment strategy that is suited to your financial situation.
Unfortunately, though, there can be danger in the realm of student loan consulting. Since student debt involves so much money (about $1.5 trillion as of 2019), it’s a hotbed for scammers and bad actors wanting to take advantage of you rather than actually help.
It’s important to be able to read the signs and know what to watch for so you know when you’re being scammed. That way you can realize the benefits of getting professional advice without becoming a scam victim.
What are student loan scams?
Scammers will generally offer you some form of help with your student debt, which may be restructuring the loan to lower payments or complete or partial loan forgiveness. On the other hand, some may threaten you by pretending to be with the IRS, claiming you owe some form of “federal student tax”. There is no such tax, so don’t fall for this.
Student Loan Consolidation Scam
After your graduation, it is a good idea to consolidate your student loans. However, the only way you can legitimately do this is with the federal government. Also, it’s completely free. If you receive an offer from a company to consolidate your student loan and they are charging a fee (they will never do it for free), they are taking advantage of you, because you can do it yourself online by visiting StudentLoans.gov.
Also, sometimes they may claim that consolidating your loans will reduce your interest or monthly payments. This is not true. Consolidation simply merges your loans into one and charges interest based on the weighted average rate. It just simplifies your debt and makes it easier to manage and keep track of. It doesn’t actually save you money, so you shouldn’t have to pay anything.
Complete or Partial Forgiveness Scam
If a private company offers to “forgive” or pay your student debt for a fee, it is always a scam. Period. A private company will never do this. If you are asked to pay an upfront fee in order for your loans to be paid or forgiven, don’t do it. Sometimes they may claim to have a relationship with the Department of Education to sound legitimate. This is always a scam and should be an immediate red flag.
There are legitimate loan forgiveness programs, but they are all federal programs and are only available to those who meet special qualifications. These legitimate options are not offered by private companies. Sometimes scammers will try to charge you money for enrolling you in free federal programs. This isn’t always a scam, because sometimes the enrollment process is confusing and it’s not always a bad idea to get help with it.
However, if you’re being pressured and they are asking for a substantial fee, they’re probably trying to take advantage you. Don’t give in to pressure and make a quick decision in these cases. Do your own research first and determine whether the fee they are charging is reasonable and if it’s worth it rather than just doing it yourself.
Some of the legitimate federal repayment programs include:
- Income-driven repayment forgiveness: The federal government offers a number of ways in which you can cap your monthly payments based on your income. Balances remaining after 20 – 25 years are usually forgiven.
- Teacher loan forgiveness: Teachers employed full time by low-income schools may be eligible for loan forgiveness if certain qualifications are met.
- Public service loan forgiveness: This option is available to employees who work for the federal government or qualifying non-profit organizations. Generally, the loan will be forgiven after 120 qualifying payments have been made.
- Student loan forgiveness for nurses: A program unique to the nursing profession is the NURSE Corps Loan Repayment Program, which pays up to 85% of a qualifying nurses student debt.
- Borrowers Defense to Repayment: An option for defrauded students from for-profit colleges. Borrowers are required to submit a claim against the college showing proof of being defrauded.
Things to watch for in detecting scams:
- A promise of immediate loan forgiveness: As mentioned earlier, this just isn’t going to happen. The only party who can legitimately, directly offer student loan forgiveness is the government. Oh, and if you ever hear the phrase “Obama Student Loan Forgiveness”, that is not a real program and they are trying to trick you.
- You’re being pressured to sign up for something: If you ever hear phrases like “Sign up now before it’s too late!”, that should be an immediate red flag. Always do your research before accepting any offers and never do it on the spot over the phone.
- Being asked to share sensitive personal information: If you’re asked for your student ID, they may be trying to get your information so they can log into your accounts and make decisions for you.
- They claim to be associated with the government: If the company claims to be acting for the federal government and agencies like the Department of Education, do not trust them.
Those are some common examples. In general, be skeptical and use good judgment.
How do scams happen and what should I do?
Receiving offers over the phone or via email is probably the most common. Other avenues used include mail and ads on the internet. Exercise caution and don’t sign up for anything without doing your research. Telemarketing calls from scammers are where the most risk is because you’re on the spot. Just don’t sign up for anything on the phone, and if you hear any red flags, hang up immediately.
Getting help from a student loan adviser:
This message is not intended to discourage getting professional help with your student loans. Quite the opposite actually. Getting help from a student loan adviser is advisable for a number of reasons. Services that a student loan consultant can provide include:
- Developing a repayment strategy that is suited to your financial situation
- Explain student loan jargon in a way that is understandable
- Help you modify repayment plans if your life plans change
- Do research for you and talk to lenders to save you time
Seeking professional help can keep you out of financial hardship and relieve the stress of handling student debt. Just be careful. To be safe, do your research and seek out help rather than responding to a solicitation.