It’s not unusual for student loan borrowers to receive letters promising debt relief. Some may be desperate enough over their debt to respond — but student loan borrowers beware: Some college debt relief offers could be scams, eager to charge you outrageous fees or worse.
If you’ve gotten a student loan debt relief letter (or text, email, or phone call), here are some red flags to look for as you determine whether the offer is legitimate or not.
Signs your student loan debt relief letter might be a scam
Caution is a good watchword to have when evaluating promises of student debt relief. Consider these seven signs of danger — if any of them show up in an offer you’re looking at, it could be worth doing some deeper research to avoid problems down the road.
1. You’ve never heard of the company or program
When it comes to federal loans, you should be dealing with your student loan servicer or getting your information from the Federal Student Aid website, run by the Department of Education.
For private loans, meanwhile, you should be dealing directly with your lender or servicer regarding any programs they have available — all of which should be clearly explained on the servicer’s website.
If the communication is from a third-party company that you’ve never heard of, or if it references a program you’re unfamiliar with, be suspicious of their student loan relief offers.
2. You’re pressured to ‘act fast’ because of new laws or limited-time offers
Since a new administration has taken office, scammers may tell you a benefit like Public Service Loan Forgiveness (PSLF) is going away and you need to act fast to take advantage of it. Be wary and do your own research — in the case of PSLF, for example, the program is still open to eligible applicants, and you can apply for free without forking over cash to a third-party company.
While there are some deadlines associated with federal student loan programs where you do need to “act now” — for example, recertifying income-driven repayments on an annual basis — you would likely be made aware of these deadlines well in advance.
Legitimate programs should always be open to those who qualify. Companies that contact you to say that an offer will only be available for a limited time are often scams.
3. You are asked to pay a fee upfront for services
Applying to consolidate your federal loans is always free. Any company that attempts to have you pay for this service is not legitimate. While some private companies may charge you to refinance your student loan debt, many do not — and those that do will charge any fees at closing, not during the application process.
4. You’re told your student loan balance can be canceled or reduced
The only way to reduce your student loan balances is to make payments on your loans.
While some federal student loans may be eligible for forgiveness, there are strict criteria for participating, and the balance is forgiven once those criteria have been met — not at the time of refinancing. Any company that promises that they can reduce the amount you owe is almost certainly lying.
5. The email or letter looks like an advertisement
A legitimate letter will come in an envelope, have a letterhead and clearly outline terms of eligibility without any pressure sales or fancy gimmicks. The use of postcards, excessive exclamation points and hyperbolic language are all potential red flags.
Likewise, if you receive an email, make sure to check where it comes from. Emails sent from free online services like Hotmail, Gmail and Yahoo — or anywhere other than the organization offering the debt relief — are suspect and should be treated cautiously.
6. You’re unable to find reviews of the company and its services
Student Loan Hero offers reviews of many reputable student loan refinancing companies. Similar reviews are also available from other sources.
If you’re considering refinancing your student loan debt, you should be able to easily obtain as much information about the company as you need to feel comfortable entrusting it with your financial information. Determining whether a company has Better Business Bureau (BBB) accreditation is another way to put your mind at ease regarding an organization’s legitimacy.
7. You’re asked to give them power of attorney or your FSA ID
Your FSA ID code is akin to a written signature. The Department of Education and its affiliates will not ask for this ID. Don’t give it to a third party, even if they promise to wipe your slate clean of student loans. With this ID and your password, changes can be made to your account.
Debt relief scammers may also ask for the power of attorney, which gives them permission to make account changes on your behalf. Rather than doing what they promise to do (like pay off your bill), they may change the contact information on your account so you don’t get unpaid bill notices. This is bad news — you think they’ve gotten your loan forgiven because bills aren’t showing up, but in actuality, your account is in default.
What if you’re already a victim of a debt relief scam?
Don’t panic. Change the passwords to your accounts so the company can no longer log in. Contact your loan servicer to remove any power of attorney documents in your file. Revoking power of attorney will take away their ability to make decisions for you.
If possible, order a stop payment on checks or wire transactions and dispute credit card purchases with the fraudsters.
Don’t wait until you’re desperate to seek help
One of the reasons companies running student loan debt relief scams are able to stay in business is that they approach those who are scared or desperate for relief from student loan debt.
If you’re overwhelmed, one of the best things you can do is to be proactive. This means contacting your student loan servicer as soon as you are experiencing challenges with the repayment process. Often, there is a lot that your servicer can do to help you get your payments under control without having to resort to another entity, particularly if you have federal loans.
Even if your current servicer does not have a program that’s a good fit for you, the sooner you know that, the sooner you can begin to compare and contrast the offerings of legitimate student loan refinancing companies so you can seek relief from student loan debt.
rather than waiting for a company to contact you, you stand a better chance of ending up with a legitimate student loan debt relief company by initiating the process yourself and conducting your own research. You will also likely find a program that it will address your current financial needs.
Taylor Gordon contributed to this report.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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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 3.50% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.49% 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 April 17, 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 04/17/2019. 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 our student 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.
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.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
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 2.48% effective April 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.49% – 7.27%1||Undergrad & Graduate|
|2.49% – 6.65%3||Undergrad & Graduate|
|2.49% – 7.41%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.49% – 7.11%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|