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.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
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1 Important Disclosures for SoFi.
2 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 2.54% APR (with Auto Pay) to 7.27% 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 March 18, 2019, 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 0318/2019. 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.
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3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed 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.
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.
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 2.5% effective February 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
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|2.54% – 7.27%1||Undergrad & Graduate|
|2.67% – 8.96%4||Undergrad & Graduate|
|3.23% – 6.65%2||Undergrad & Graduate|
|2.69% – 7.43%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|