3 Borrowers Share the Student Loan Scams That Stole Their Money

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With Americans owing $1.48 trillion in student loans, many borrowers are looking for any kind of help they can get as they try to dig themselves out of debt.

In the process, they might encounter shady companies that prey on student loan borrowers. The scammers often claim they can offer reduced payments — or even complete student loan discharge — in exchange for your hard-earned dollars. And while you’re at it, they gladly will take your Social Security number, too.

Once they have your money or sensitive information, they drop out of touch, leaving you in a worse position than before. In October 2017, the Federal Trade Commission accused student loan debt relief scammers of taking more than $95 million in illegal upfront fees from unsuspecting borrowers.

I spoke with three borrowers who fell victim to the scams. Here are their stories, along with the red flags you can watch out for to make sure this doesn’t happen to you.

1. Falling for a student loan forgiveness scam

In 2014, rumors started circulating on social media about a new “Obama student loan forgiveness program,” which turned out to be a scam.

However, when Jessica Mendoza got a call from a company called Student Loan Relief Group (SLRG) saying she was on a list of student loan recipients eligible for Obama loan forgiveness, she wanted to believe it was true.

Since she had paid off the small loans she took for college, she connected the callers with her mom, who had $100,000 in education debt that she had taken out to cover Mendoza’s education.

“We went on a series of back-and-forth communications and they seemed to be really helpful and generous about providing information back to us,” said Mendoza.

After collecting her mom’s information, the company told the Mendozas that the debt would be cleared — for a monthly fee.

“I had to make monthly $29 payments for the service [and for] making sure that the government understands that we were exempted from regular loan payments because we met the requirements to qualify for this relief program,” said Mendoza.

Although her mom’s loan balance did appear to go down to zero on the company-provided platform, Mendoza and her mom soon received a letter from the federal government saying it was filing a lawsuit against SLRG. Regulators accused the company of deceiving student loan borrowers under the SLRG name as well as an alternate name, Student Debt Relief Group.

“The government had filed a lawsuit [against] the company that had hooked us in and told us to cancel all payments and not do business with them,” said Mendoza.

Mendoza managed to stop the monthly charges of $29, but her mom still owes the $100,000 debt.

2. Buying into a parent loan discharge scam

After borrowing more than $20,000 in Parent PLUS Loans on behalf of his son, Michael Benner faced payments of about $200 per month. With limited income during retirement, Benner had trouble keeping up with these bills.

That’s when Consumer Advisory called him claiming to be a student loan relief company. Benner doesn’t know how the company representatives got his name or number, but he was interested when they promised to make his student debt go away.

“[They] promised to make student debt go away for $599,” Benner said. “I didn’t have that kind of money so [they] broke it down into payments.”

After paying the fee, Benner waited for his Parent PLUS Loans to be forgiven. Seven months later, he’s still waiting.

Every time Benner calls the company, he says he reaches a new person who doesn’t give him any answers. Now, he has given up on seeing student loan relief or getting his money back. He has fallen $1,400 behind in payments and his debt still hovers around $20,000.

“They charged me $599 and haven’t done anything in seven months,” said Benner. “Are there such crooks out there? They promised the moon and did little more than pretend to work and then dropped me with no communication.”

3. Spending $700 on a student loan forgiveness scam

After graduating from college, Jhoana DeSantiago faced steep monthly payments on her student loans. She struggled to pay the debt while covering rent, car payments, and other living expenses.

That’s when she started looking for help and came across a company called Doc HU, which promised debt relief.

“I contacted Doc HU trying to get help with my student loans,” said DeSantiago. “They said all I would need was $700 and they would clear my student loans or basically help me go back to monthly payments.”

After DeSantiago paid the $700 “fee,” she didn’t hear anything from the company. “It’s been two years and they never helped me,” she said. The company stopped responding to emails or answering her calls.

“I was desperate, and they took advantage of me,” DeSantiago said. Now, in addition to her high monthly payments, she’s lost $700 she couldn’t afford to spare.

Watch out for these student loan scam red flags

Paying back student loans can be a struggle. If you’re seeking debt relief, you should be wary of scammers. Look out for these red flags so you don’t fall prey to a scam.

  • Charging upfront fees: Most legitimate companies won’t charge you fees upfront for their services. One exception is student loan counselors, who might charge a fee for financial counseling. But remember that these counselors don’t have any secret information you can’t find out on your own for free.
  • Fees for loan consolidation or income-driven repayment (IDR) plans: Beware if a company wants to charge you to consolidate your federal or private student loans or sign up for IDR plans for your federal loans. You can sign up for IDR plans for free through the Federal Student Aid office. You can also consolidate your federal loans for free via a Direct Consolidation Loan from the U.S. Department of Education. If you have federal and private loans, you can consolidate them on your own via student loan refinancing lenders.
  • Promises of fast loan forgiveness or discharge: There are ways to pursue student loan forgiveness or debt discharge, but most methods require years of public service or repayment. And you don’t have to pay a fee to qualify for these programs.
  • Collecting sensitive information: Be careful about giving out sensitive information to an unverified company, especially if it contacted you out of the blue. Protect your data so you don’t become a victim of identity theft.

If you aren’t sure about a company’s credentials, check to see if it’s accredited by the Better Business Bureau. You also might want to do a simple Google search of “[company name] + scam” to see if anything comes up.

Besides doing your due diligence, remember to trust your instincts. If an offer sounds too good to be true, it probably is.

For more warning signs, check out these four surefire ways to spot a student loan forgiveness scam.

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1 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student Loan RefinanceFixed rates from 3.999% APR to 7.804% APR (with AutoPay). Variable rates from 2.480% APR to 7.524% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.480% APR assumes current 1 month LIBOR rate of 2.07% plus 0.91% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.72%-8.17% (2.72%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.50%-8.69% (3.50% – 8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Average savings based on 18,113 actual customers who refinanced their federal and private student loans through our Education Refinance Loan between January 1, 2017 and December 31, 2017. The calculation is derived by averaging the monthly savings of Education Refinance Loan customers whose payments decreased after refinancing, which is calculated by taking the monthly student loan payments prior to refinancing minus the monthly student loan payments after refinancing. The borrower’s savings might vary based on the interest rates, balances and remaining repayment term of the loans they are seeking to refinance. The borrower’s overall repayment amount may be higher than the loans they are refinancing even if their monthly payments are lower.
2.57% – 5.87%Undergrad
& Graduate
Visit Earnest
2.80% – 6.38%1Undergrad
& Graduate
Visit Laurel Road
2.48% – 7.52%2Undergrad
& Graduate
Visit SoFi
2.47% – 7.99%Undergrad
& Graduate
Visit Lendkey
2.57% – 6.65%3Undergrad
& Graduate
Visit CommonBond
2.72% – 8.17%4Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.