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.
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.
- 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.
- 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.
- 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.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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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 firstname.lastname@example.org, 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|