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Beware Of Student Loan Repayment Scams: 5 Red Flags

by Refi.me Staff on October 8 2021

When you’re struggling with student loan repayments, anyone offering any kind of help can seem heaven-sent. However, when an offer seems too good to be true, you better believe it is. Almost 100% of cold calls or emails you receive promising some sort of student loan debt relief are scams.

Scammers prey on vulnerable borrowers knowing they are desperately looking for a way to get out of debt. This makes you an easy target. Believing the scammer and giving them the information they ask for can make a bad situation worse. They can use your personal details to commit any type of financial fraud. This could send you even further into debt.

These are some of the more common red flags to look out for.

#1. You Receive A Cold Call Or Email From A Company Offering To Help

Receiving a cold call or email is a sure sign of a scam. Legally, nobody other than your loan servicer would have details about your loan. If somebody has approached you offering help with your loans, they’ve obviously gotten your contact details illegally.

No matter how legitimate the company seems, never enter into any discussion with them. And definitely don’t get tempted to ‘try them out’ regardless of how persuasive they sound. The best thing you can do is delete the email or disconnect the phone immediately.

#2. You’re Asked To Pay An Upfront Fee To Get Help

If the caller or emailer requires you to pay an upfront fee, it’s definitely a scam. Never engage with companies that ask for payments before they actually do anything. It’s illegal for any company to charge customers before they provide the promised help. Anybody requesting an upfront payment for debt relief services is breaking the law.

Besides, there’s nothing that any person or company can do that you can’t do on your own for free. All you need to do is call your loan servicer and discuss your options.

Never pay upfront fees with any third party for student debt relief services. You definitely won’t get any help and you won’t get your money back either.

#3. You’re Pressured Into Signing Up Quickly

“Sign up now before it’s too late” is a common scammers’ ploy. The idea is to get you to sign before you’ve had time to think about it. Scammers know how to get you to sign quickly. They’ll tell you if you don’t act immediately you may miss a deadline or lose your eligibility to apply for forgiveness, loan consolidation, or repayment plans. The problem is, once you sign whatever contract they give you, you’re trapped.

Never feel pressured to “act now.” It’s important to take your time and check out if there are any such deadlines. You’ll find that legitimate loan programs generally don’t impose such tight deadlines without giving their borrowers sufficient notice.

#4. The Company Promises Immediate Student Loan Forgiveness Or Debt Cancellation 

There’s absolutely no way anyone can get your student loans forgiven or canceled if you don’t qualify. There are legitimate federal student loan forgiveness programs that help lower or eliminate federal student loans but only if you qualify. These programs have very strict qualifying requirements. The criteria are laid out in full detail in your loan contract. If you need any help with understanding the terms, you can always ask your loan servicer.

No private debt relief company has the ability to negotiate a special deal with your loan servicer. Neither can they dispute your loans or talk your loan servicer into forgiving or canceling your debt. It is just not possible.

The only way you can get your federal loans forgiven is if you qualify for the forgiveness program. And you can only initiate the proceedings yourself. Nobody can do this on your behalf.

#5. You’re Asked To Share Sensitive Personal Info Or Sign A Power Of Attorney

Asking to share sensitive personal information is another common play that scammers use. They’ll ask for your Social Security number or Federal Student Aid ID. It sounds legitimate as these details are usually needed to sign in to your account to access your loan information. Some companies may even ask you to sign a power of attorney, authorizing them to deal with your loan servicer on your behalf.

Handing over the tedious task of dealing with student debt can sound very tempted. But giving your personal details or signing a power of attorney can be very risky. With this information, the scammer has unlimited access to your financial details. They can take on additional loans in your name, change your student loan account password and commit all sorts of fraud. You’ll essentially lose control of your financial accounts. They can even steal your identity.

Don’t ever give anyone your Social Security number, FSA ID, or account passwords, no matter what they say. Legitimate companies will never ask you for these details.

Important Things To Remember To Avoid Getting Scammed

A few important things to keep in mind so you don’t become a victim of a student loan repayment fraud:

  • Student loans are very difficult to be completely forgiven or canceled.
  • You can get federal student loans forgiven ONLY if you meet the qualifying criteria.
  • You don’t need to pay anyone to get federal loan forgiveness. If you qualify, you can start the process yourself through the Department of Education.
  • Nobody can negotiate with lenders on your behalf.

What Is The Best Solution To Managing Student Loan Debt?

There’s no doubt that dealing with student loan debt can be overwhelming. Fortunately, there are alternatives to make the repayment more manageable.

Refinancing is one of the best ways to manage your student loan debt. This involves exchanging your existing loans for a new loan with new terms and rates. If the current monthly payments are unaffordable, you can refinance with a longer-term. This lowers the monthly payments and makes them more affordable.

Income-based repayment plans can help lower the monthly payments of your federal student loans. These plans base your monthly payments as a percentage of your income so they’re always affordable.

We hoped you enjoyed this article! Remember, you can compare your personalized rates with our lending partners and potentially lower your monthly student loan payments and save money.

The Refi.me team is always here to help you