Teenagers who signed loan paperwork to pay for college are now facing decades of burdensome debt. More than 70 percent of those earning a bachelor’s degree carry student loan debt after graduation, with an average balance of $28,400, according to the White House. This number is not only unsustainable, it’s also rising.
Two types of companies have emerged in response to the student debt crisis.
On one hand, there are many legitimate companies that genuinely help borrowers handle their student loan debt. On the other, a handful of corrupt companies are preying on stressed and financially strapped borrowers.
If you’re thinking about using the services of a private debt relief company to help you manage or refinance and consolidate your student loan debt, conduct research before signing any paperwork or paying money to ensure they’re reputable.
3 Signs a Debt Relief Company Is a Scam
Stay on the lookout for the following red flags that will help you to spot and avoid fraudulent debt relief companies.
1. Phrases Such as “Act Fast” or “Limited Time Offer”
A reputable debt relief company will not need you to act immediately. Their offers aren’t “going fast.”
Financial scammers try to hook you based on a fear that you will somehow miss out on your only opportunity to consolidate your debt. Legitimate companies will take their time to work with you and find a solution that is individualized to your unique financial situation.
2. Debt Relief Companies Claiming to be Affiliated with a Government Agency
Scammers are aware that people have a higher trust in government agencies. If a company claims to be affiliated with a federal agency, don’t take the company’s word for it.
Get validation from the source that they are a legitimate debt relief company affiliated with the agency. The easiest way to do this is by visiting that government agency’s website (look for “.gov” at the end of the URL) and see if the entity is mentioned.
If you want to seek student debt relief from the government, start by going to the Federal Student Aid website to learn more about repayment, consolidation, or even debt forgiveness and cancellation.
3. An Upfront Fee to “Guarantee Your Rate”
Never pay any company a fee in order to “lock in” your rate. People have been scammed out of thousands of dollars believing that they were making a wise investment in getting their debt under control. As soon as they hand over the money, the company disappears and their contact phone numbers are suddenly out of service.
Most reputable debt relief companies won’t charge any fees to guarantee a rate.
Finding the Best Debt Relief Companies
Read the terms and conditions
Read the small print, because therein lie the truths of any debt relief offer. Make sure that you understand the guidelines, the contract, and conditions of the offer before signing any documents to agree to their terms.
Look for the APR
Before agreeing to any debt consolidation or relief program, look carefully at the annual percentage rate (APR). The APR isn’t just the interest rate; it also includes any fees or additional costs associated with the transaction.
Some companies will lure you in with a low APR, which lasts only a few months. After your “introductory offer” ends, you may find yourself locked into an interest rate even higher than the rates you left behind when you decided to consolidate with that company.
Look at the Better Business Bureau rating
Not every business is eligible for accreditation from the Better Business Bureau (BBB). The BBB has strict accreditation standards, and even if the business meets all of the criteria, they still may not be accepted by the BBB’s review board.
Thee high standards ensure that any BBB accredited company is trustworthy. If you’re looking for help from a legitimate student debt relief company, check for a BBB rating.
Seek help from nonprofit organizations
Look to non-profits for advice about student debt consolidation or reduction options. Non-profit organizations are created to make a difference in the community and assist people who would otherwise have nowhere else to turn for help.
Reputable Debt Relief Companies
Student Loan Hero is an unbiased solution that helps you organize, manage, and repay your loans. CEO Andy Josuweit graduated with $74,000 in student loan debt and founded the company as a resource for people in a similar situation. So far, more than 20,000 borrowers have managed and repaid over $1 billion in debt working with its partners.
Here are three legitimate banks that can help with student loan debt relief:
SoFi offers undergraduate and graduate student loan debt consolidation and refinancing with rates starting as low as 2.47%. It allows borrowers to refinance both federal and private student loans and doesn’t charge application fees.
Earnest also offers both undergraduate and graduate refinancing with variable rates starting at 2.46% and fixed rates starting at 3.89%. They don’t charge origination fees or application fees.
Citizens Bank offers refinancing and consolidation of both federal and private student loans with no application or origination fees. They also offer co-signer release.
To learn more about each of these banks (as well as explore other options), check out this detailed synopsis.
Stick to the Golden Rule of Finances
To protect yourself from scammers and fraud, look out for all of these red flags and be alert to potential fraud situations. Always validate the company’s reputation. Never, ever sign anything without reading and completely understanding the terms and conditions.
Most importantly, always remember the golden rule of finances: If you see an offer that seems too good to be true, it probably is.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. 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. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.46% – 6.97%1||Undergrad & Graduate|
|2.57% – 8.44%4||Undergrad & Graduate|
|3.05% – 6.47%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|