“Hello! We have exciting news for you. You may qualify for a newly approved student loan forgiveness program that could reduce your payment to $0 or wipe away all of your student loans completely. If you’re interested in learning how you could be student loan free, please stay on the line as we connect you to our student loan forgiveness experts.”
The robotic woman’s voice was tempting. As a student loan holder, reducing my monthly payment to nothing seemed almost too good to be true.
For a paltry $2,000 fee, I could have my $18,000 worth of federal student loans erased almost overnight. The fee would cover my expert “negotiating” with the federal government and filing the lengthy amount of paperwork required.
As I chatted with the representative (or “expert,” as he called himself), I realized that I was two seconds away from falling victim to a student loan scam. These scams are becoming more common because recent graduates are more burdened than ever by federal student loan debt.
In order to protect at-risk borrowers, the Consumer Finance Protection Bureau and various state Attorney Generals have have begun prosecuting the more dangerous businesses.
These businesses often fly under the radar and test boundaries both legal and moral. Therefore, it is important to understand how to spot a student loan scam, the alternatives to these companies’ offerings — and how to fight back if you become a victim.
Spotting student loan scams in action
Sometimes spotting nefarious student loan related businesses can be tough. Many of them use official-sounding program names such as “Obama Student Loan Forgiveness” or use confusing, technical terminology when discussing your options.
However, there are always a few noticeable red flags that should alert you that the business you are dealing with a student loan relief scam:
1. Payment required up front
The representative on my phone call cheerfully explained that to get started, I would first need to pay a deposit of $500 to their account.
This should have alerted me immediately to what is called an “advance-fee scam.” These businesses cash in on your payment and then disappear or promise work that will never get done.
The Federal Trade Commission has deemed this practice in debt relief businesses illegal. Legitimate student loan relief businesses must not charge fees until there is a successful settlement or service and the borrower has made a payment towards their newly negotiated payment plan.
2. Consolidation application fee
When in default on a student loan or facing a financial hardship, the immediate need for relief is heightened. Student loan relief scammers jump on this by offering instant help consolidating loans and/or lowering payments.
What these businesses are actually doing is simply filling out the paperwork for an income-driven repayment plan or applying for federal consolidation on your behalf — all while charging you a fee after the process is complete.
However, there is no need to pay for this service when you can do it yourself for free. In fact, we at Student Loan Hero will still do the work for you, but we won’t charge you anything. We just love our users that much. Sign up here.
3. Total elimination in exchange for information
One of the most compelling student loan scams involves the massive promise of eliminating all your student loan debt completely. Most of the time, these businesses are either operating for the advance fee or they are trying to get your private data, such as your Social Security number or your FSA ID (what you use to apply for student loan aid).
The truth is that discharging your federal student loans is nearly impossible, except for cases such as death or total and permanent disability. There are, of course, forgiveness programs that you may qualify for (such as the Teacher Forgiveness or Public Service Loan Forgiveness). However, these are programs you can apply for yourself if you meet all the requirements.
Victims of student loan scams: what to do
Don’t panic! If you believe that you have accidentally fallen for one of these student loan scams, there are a few steps you can take to protect yourself. Being proactive and covering all of your bases will help you fight back.
The first step should be a call to the three major credit bureaus — Equifax, Experian, and TransUnion — to report possible fraud and put a freeze on your credit. While many scammers are in it for the fees and not your personal information, sensitive data such as your Social Security number or FSA ID could be at risk if that business is hacked or an employee mishandles your application.
If you gave out your FSA ID, you may also want to contact the Office of the Inspector General, where they will help you decide the best course of action. Also, consider reporting the business to the Consumer Financial Protection Bureau via their online complaint site or by calling 855-411-2372.
Finally, if the scam involves an advance fee, you may be able to contact your bank or credit card company to stop the payment. While there is no guarantee you will get your money back, you may be able to get help if the payment has not yet been processed or you can prove that it was a scam.
Surviving and preventing a student loan scam
The golden rule when it comes to unfamiliar businesses should always be: “If it’s too good to be true, it probably is.” Before giving away your money and letting these businesses go to work on your behalf, read up on how you can reduce your federal student loan payments on your own.
Empowering yourself by knowing both your rights and options is your number one defense against student loan scams.
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 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% 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
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
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.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|