New Federal Initiative Cracks Down on Student Loan Scams


As student loan debt continues to increase nationwide, so do reports of student loan forgiveness scams. In fact, the Consumer Financial Protection Bureau reported a 62 percent increase in complaints about student loans from 2015 to 2016.

Student loan debt relief scams target borrowers desperate to reduce or eliminate their loan balance. These companies swindle people out of hundreds or even thousands of dollars.

Now, the federal government is stepping in to crack down on student loan scams through an initiative known as “Operation: Game of Loans.” (No, really, that’s the name.)

Winter is coming for student loan forgiveness scams

According to the Federal Trade Commission (FTC), debt relief scammers collected over $95 million in illegal fees from borrowers searching for help. To stop this disturbing trend, the FTC is partnering with 11 states and the District of Columbia for Operation: Game of Loans.

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This initiative is the first coordinated federal-state law enforcement program to go after student loan scammers. Operation: Game of Loans entails 36 actions — including civil lawsuits — against various companies that promised aid in return for large and unnecessary fees.

“Winter is coming for debt relief scams that prey on hardworking Americans struggling to pay back their student loans,” said Maureen K. Ohlhausen, FTC Acting Chairman, in a press release. “The FTC is proud to work with state partners to protect consumers from these scams, help them learn how to spot a scam, and let them know where to go for legitimate help.”

The state partners involved in the initiative are Colorado, Florida, Illinois, Kansas, Maryland, North Carolina, North Dakota, Oregon, Pennsylvania, Texas, Washington, and the District of Columbia.

Because the night is dark and full of scammers

After mortgages, student loans are the largest form of debt in the United States. With over $1.45 trillion in outstanding student loan debt, it’s easy to see why scammers would target this potentially lucrative market.

Student loan scams can take several different forms, but here are some of the most common.

  1. Loan forgiveness in exchange for information. Some of the most compelling scams promise you loan forgiveness if you just hand over your Social Security number or Free Application For Federal Student Aid (FAFSA) login. Once they have your information, they can steal your identity or borrow money in your name.
  2. Pay thousands for loan forgiveness. Other companies promise to eliminate your student loans if you pay them fees as high as $2,000. But that’s not how real student loan forgiveness programs work. Once you pay the money to the scammer, you still owe the remaining balance on your loans.
  3. Pay a fee for income-driven repayment plans or forbearance. Some companies say they can reduce or postpone your monthly payments if you pay a fee. Some even do file the paperwork for you. However, paying a fee is unnecessary. You can apply for income-driven repayment plans, forbearance, and deferment on your own, for free.

Understanding how these scams work can help you spot an illegitimate offer.

How to protect yourself (if you don’t have dragons)

Although the government is taking action, there are hundreds of student loan debt relief companies that target borrowers like you. Before handing over your personal information or your hard-earned money, look for these red flags.

  • It sounds too good to be true. If it seems too good to be true, it probably is. Although there are legitimate student loan forgiveness programs, they are free, and you can apply on your own.
  • They charge a fee. Companies that ask for fees in exchange for processing paperwork or submitting applications are often scams.
  • They have poor Better Business Bureau ratings. Before handing over money or information, look up the company on the Better Business Bureau’s website.

If a company has one or all of those signs, run, don’t walk, away. It could be one of the many student loan forgiveness scams out there today. If you still need help managing your student loans and understanding your options, Student Loan Hero provides advice and guidance, free of charge.

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