Student loan forgiveness scams often prey upon borrowers in need of real help. Many of these scams promise to help you with your debt — for a fee. According to the Federal Trade Commission (FTC), debt relief companies have collected $95 million in illegal fees.
Last year, the FTC partnered with 11 states and the District of Columbia to launch Operation Game of Loans. It targeted companies and organizations that promised student loan relief in exchange for paying fees or handing over personal information.
However, it’s up to you to protect yourself. Here are four ways you can spot student loan forgiveness scams — plus real student loan repayment and student loan forgiveness options that are legitimate and currently available.
4 red flags of student loan forgiveness scams
If you’re looking for real student loan forgiveness, it’s important to know the warning signs of a scam. Here’s what government agencies warn borrowers to watch out for.
1. Asking for an upfront fee
Many student loan forgiveness scams offer to cancel debt or provide other assistance to federal student loan borrowers for an upfront fee.
What they don’t tell you is the “assistance” they’re offering either isn’t real or is available for free to borrowers with federal student loans. For instance, scammers often charge borrowers in exchange for “help” such as:
- Consolidating student loans
- Switching to a lower monthly payment
- Qualifying for student loan forgiveness
It’s illegal to charge debt relief fees before getting real results. Unfortunately, many debt relief companies still do so, demanding upfront fees as high as $1,500, according to the FTC.
2. Promising relief that’s too good to be true
Many student loan repayment scams play on borrowers’ desperation and promise debt relief they can’t possibly deliver, ranging from immediate student loan forgiveness to settlement of student debt that’s in default.
But there’s no such thing as immediate student loan forgiveness. Additionally, resolving student loan default is the borrower’s responsibility; it can’t be discharged to a third party. Any company that offers either of these options is trying to take advantage of you. Run away.
3. Posing as “official” government departments
You’ve probably seen advertisements for student loan scams on the internet. That in itself is a red flag, as most legitimate agencies and servicers don’t advertise this way.
Student loan forgiveness scams often use tactics to make their advertisements seem legitimate, such as:
- Using official-looking government seals or titles to deceive borrowers into thinking they’re part of these departments or affiliated with them
- Spoofing real government sites or forms, which can look like the original but aren’t
- Offering help that sounds official but doesn’t exist, such as “Obama Student Loan Forgiveness” or “Trump Student Loan Forgiveness”
These companies can misrepresent themselves in ways that trick student loan borrowers into trusting them. That’s why it’s important to verify the legitimacy of the company or program you’re working with before you hand over any money or personal information.
StudentLoans.gov and StudentAid.ed.gov are two federal government websites designed to help federal student loan borrowers navigate their options. Since many student loan scams claim to be affiliated with the Department of Education, it’s always a good idea to double-check the URL. If the program doesn’t use either of the URLs listed above, then it’s probably a scam.
4. Asking for your Federal Student Aid ID
Another common tactic used in student loan forgiveness scams is asking you to share your Federal Student Aid ID (FSA ID). It’s a unique code you use to authenticate your identity when you need to view, modify, or manage your federal student loans on an official government site.
The FSA ID acts as your legal signature on your student loan accounts, according to the Federal Student Aid Office. Anyone who has your FSA ID can use it to:
- Access your personal information in your federal student aid account, including viewing your personal loans
- Take action or make changes without your knowledge or consent
- Fraudulently take out a new loan in your name
The Federal Student Aid Office also warns that scammers might ask you to sign forms giving them “third-party authorization” or “power of attorney.” Ultimately, signing such forms gives scammers authorization to act on your behalf without your prior approval or knowledge.
Know your payment and forgiveness options
The best way to protect yourself from student loan forgiveness scams is to know what your options are. By taking the time to do research, you can figure out if a student loan forgiveness offer is legit or a scam.
Here are the most common student loan forgiveness options available today:
- Income-driven repayment plans offer student loan forgiveness. For borrowers who don’t repay their student loans in full after 20 or 25 years, the remaining outstanding balance is forgiven. However, you might have to pay income tax on the forgiven amount.
- Public Service Loan Forgiveness is a federal program designed to forgive student loan debt for employees of qualifying government or nonprofit organizations. Public service employees with qualifying student debt might be eligible to have their federal student loan forgiven after 10 years of repayment.
- Total and Permanent Disability Discharge can cancel loans for borrowers who prove they’ve suffered total and permanent disability.
- Federal Perkins Loans Cancellation and Discharge can be secured if you’re employed in certain public service careers. Check out the full list of conditions to see if you could qualify.
Unlike student loan forgiveness scams, these options are the real deal.
But if you come across something that isn’t on this list, watch out. Make sure it doesn’t raise any of the red flags listed above. If you’re worried or suspicious, walk away — so you don’t become another victim of student loan forgiveness scams.
Emily Guy Birken contributed to this article.
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