How to Avoid Student Loan Relief Scams

By Julissa Treviño Updated on May 3, 2019

Have you ever seen an advertisement or received a call from a company that asked you to enroll, subscribe, or pay an upfront fee to help you manage the burden of your student loan debt?

If so, you've probably wondered if those offers were legit — or if you were being targeted for a scam. 

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Here's the real scoop: while it's not illegal for companies to charge you for helping you get out of debt, you can easily modify your federal student loans for free through your loan servicer.  
 
Below, we've outlined major red flags to watch for when looking into student loan debt relief, as well as several legitimate options you might want to consider.

2 warning signs

Being asked to pay an up-front fee is the first red flag to watch out for.

Unscrupulous companies that are counting on the fact that you don't know any better will try to get you to commit to a fee of some sort — whether they call it an enrollment fee, a subscription, a consolidation fee, or a maintenance fee. This charge is often $999 or 1% of the loan balance. 

But like we said earlier, your loan servicer can help manage your federal student loan debt for free. Any money that you're asked to pay upfront could have gone to your loan balance.

Another red flag is when private companies ask for information such as your Federal Student Aid (FSA) PIN. Because your FSA PIN can be used to look up your student loans and personal information, as well as to apply for new loans, you should be very careful about giving out this information. 

The Department of Education has discouraged the sharing of FSA PINs and even prohibits the solicitation of someone else's PIN.

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Legitimate options for debt relief

So who can you trust? 

Your loan servicer

This is the company that handles the payments and other services for your federal student loans. They can work on anything from adjusting your repayment plan to consolidating your loans so that your debt is easier to manage.

They can also help you determine if you're eligible for student loan forgiveness. Be sure to call your servicer to get the most accurate information for your particular situation.

Companies that don't charge up-front fees

Many private companies and lenders can also be good resources for student loan debt relief through refinancing or consolidation. How can you tell if they're legit? They won't ask you to pay upfront costs.

Refinancing your student loans should save you money, not cost you money. Legit companies will present offers that will allow you to lower your interest rate so reduce your monthly payment or save money over the life of your loan.

If you opt for the refinancing route, you'll need to do some research to make a good decision. Be sure to compare lenders, rates, and loan terms.

Check out our picks for the Best Banks for Student Loan Refinancing.

Published in: Forgiveness

About the Author
Julissa Treviño

Julissa Treviño is a writer and journalist based in Texas. Her work has appeared in BBC Future, CityLab, Columbia Journalism Review, The Dallas Morning News, Racked, Teen Vogue and other publications. She enjoys traveling, playing with makeup, biking and trying new food. Follow her @JulissaTrevino. Read more by Julissa Treviño