How to Avoid These Tricky Student Loan Scams

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“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:

Spotting student loan scams in action: Red flags
Victims of student loan scams: What to do
Surviving and preventing a student loan scam

Spotting student loan scams in action: Red flags

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

Victims of student loan scams: What to do

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.

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. 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 2021!
LenderVariable APREligible Degrees 
1.89% – 5.99%1Undergrad
& Graduate

Visit Splash

1.99% – 5.64%2Undergrad
& Graduate

Visit Earnest

1.91% – 5.25%3Undergrad
& Graduate

Visit Lendkey

2.25% – 6.88%4Undergrad
& Graduate

Visit SoFi

1.89% – 5.90%5Undergrad
& Graduate

Visit Laurel Road

2.39% – 6.01%Undergrad
& Graduate

Visit Elfi

Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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 Feburary 1, 2021.

2 Important Disclosures for Earnest.

Earnest Disclosures

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: 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 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% 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 October 26, 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 10/26/2020. 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, 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.

3 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via 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 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 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.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 02/17/2021 student loan refinancing rates range from 1.91% APR – 5.25% Variable APR with AutoPay and 2.95% APR – 7.63% Fixed APR with AutoPay.

4 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 2.99% APR to 7.33% APR (with AutoPay). Variable rates from 2.25% APR to 6.88% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.13% plus 2.37% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The discount will not reduce the monthly payment; instead, the interest savings are applied to the principal loan balance, which may help pay the loan down faster. Enrolling in autopay is not required to receive a loan from SoFi. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.  

5 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

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.

  1. Checking your rate with Laurel Road only requires a soft credit pull, 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.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

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%.


This information is current as of January 4, 2021. Information and rates are subject to change without notice.