“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 through a company similar to the United Student Loan Assistance Center or SL Account Management seemed almost too good to be true: For a $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 required paperwork.
As I chatted with the representative (or “expert,” as she called herself), I realized that it was a student loan scam. These scams are becoming more common because recent graduates are more saddled than ever with federal student loan debt.
Here’s what you need to know:
To protect borrowers, the Consumer Financial Protection Bureau (CFPB) and various state attorneys general have targeted the more dangerous businesses, which often fly under the radar and test boundaries, both legal and moral. It is important to understand how to spot a student loan scam and how to fight back if you become a victim.
Sometimes, spotting nefarious student loan-related businesses can be tough. Many of them use official-sounding program names, such as Obama Student Loan Forgiveness. There are other companies — including the Student Education Center, Federated Student Loan Advisors, AmeriHelp and Documents Done Right — that charge you a fee to help with loan forgiveness or repayment services but are not affiliated with the U.S. Department of Education.
However, there are always a few noticeable red flags that should alert you that the business you are dealing with is a student loan relief scam.
1. The company requires payment upfront
The representative on my phone call cheerfully explained that to get started, I would first need to provide a deposit of $500 to their account.
This should have alerted me immediately to 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 (FTC) has deemed it illegal for debt-relief businesses to ask for money upfront. Legitimate student loan relief businesses must not charge fees until there is a successful settlement or service and the borrower has made a payment toward their newly negotiated payment plan.
2. The company charges a consolidation application fee
When in default on a student loan or facing financial hardship, the immediate need for relief is heightened. Student loan relief scammers jump on this by offering instant help consolidating loans and/or lower payments.
What these businesses are doing is 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. The Federal Student Aid office of the education department urges students — and parents — not to pay for services that are free.
3. The company offers total loan elimination in exchange for information
One of the most compelling student loan scams involves the massive promise of eliminating your student loan debt completely. Most of the time, these businesses are either operating for the advance fee or 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 for which you may qualify, such as teacher loan forgiveness or Public Service Loan Forgiveness. However, these are programs you can apply for yourself if you meet all the requirements.
4. The company claims to be affiliated with the Education Department
Scammers are aware that people trust government agencies. If a student loan relief company claims to work for — or on behalf of — the Education Department, don’t take the company’s word for it.
Get validation from the company that they are a legitimate debt relief company. The easiest way to do this is by visiting the Federal Student Aid website. The department only contracts with certain student loan servicers to work with you on repayment plans, loan consolidation and other tasks related to your federal student loans.
5. The company advertises quick help
To lure student loan borrowers, some for-profit businesses aggressively advertise their services, — which are often misleading and false — online.
Those ads would often claim guaranteed results or refunds in a short period. They may also claim a high, but unverifiable, satisfaction rate of number of people served, according to a National Consumer Law Center report.
Beware such empty promises that show up on Google or Bing when you search for student loan relief. Federal Student Aid clearly states: “There’s nothing a student loan debt relief company can do for you that you can’t do yourself for free.”
Federal Student Aid and the federal loan servicers it contracts with can help you:
- Lower or cap your monthly federal student loan payment
- Consolidate your federal loans
- Determine if you are eligible for loan forgiveness or other programs
- Get your loans out of default
If you believe that you have accidentally fallen for one of these student loan scams, don’t panic. There are a few steps you can take to protect yourself. Being proactive and covering all 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 rather than your personal information, sensitive data like your Social Security number or FSA ID could be at risk if that business is hacked or an employee mishandles your application.
If you’re a victim of an FSA scam, you may want to contact the Office of Inspector General to help decide the best course of action. Also, consider reporting the business to the CFPB via its online complaint site or by calling 855-411-2372. You can also file a complaint online with the FTC.
Finally, if the scam involves an advance fee, you should try 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.
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. That way, you can empower yourself by knowing both your rights and defense options against student loan scams.
Familiarize yourself with common student loan relief scams. You can find scam examples on the FTC’s website. And don’t provide your personal information on online applications or to possible scam callers that sound skeptical.
Shen Lu contributed to this article.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 6.65%1||Undergrad & Graduate|
|1.99% – 7.10%2||Undergrad & Graduate|
|2.99% – 6.44%3||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 6.43%4||Undergrad & Graduate|
|3.18% – 6.07%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Laurel Road.
Laurel Road Disclosures
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.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020. Information and rates are subject to change without notice.
2 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is 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 April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates 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 co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are 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.
3 Important Disclosures for SoFi.
4 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 3.19% APR (with Auto Pay) to 6.43% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.43% 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 June 15, 2020, 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 6/15/2020. 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 protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 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.
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 0.19% effective June 10, 2020.