If you have student loans, you've probably seen claims by companies that claim they can reduce your loan payments, pay your loans down quickly, or eliminate your loans altogether.
Unfortunately, some things are too good to be true. But considering that some legitimate companies do exist to help you pay down your debt, how can you tell the difference?
Claims like “Act immediately to qualify for student loan forgiveness before the program is discontinued" should be reg flags that these companies are running scams. The Federal Trade Commission, in fact, has prosecuted companies against unlawful student loan debt relief practices.
Student loan debt relief companies are private companies that claim to help you manage your student loans for a fee. Usually, they offer services, like lowering your monthly payments, that you can do yourself. These companies are not affiliated with the Department of Education, though they sometimes falsely claim to be.
Whether these companies are sending you mail, calling you or advertising on TV, here's what you should watch for to make sure you're not scammed:
1. They ask for up-front or monthly fees
It's illegal for companies to charge an up-front fee for helping you before they even start working with you.
In addition, it's important to know that assistance on loan management is available directly through your loan servicer for free, so be wary of any company charging an upfront or monthly "maintenance" fees.
2. They promise immediate and total loan forgiveness
If it sounds too good to be true, it probably is.
A company that offers immediate and total loan forgiveness or cancellation is promising something it can't keep.
While forgiveness programs are available directly through the federal government, it often takes years of making on-time payments or requires employment in certain fields. Debt relief programs can't bypass these requirements.
3. They practice aggressive tactics
Borrowers have reported companies aggressively calling, texting or emailing them. These companies also tend use urgent language, such as like, "Your loan is flagged" or "Act immediately." They also run ads on TV and online.
Beware of claims than an offer is limited, or that you have to act urgently because of new laws or programs that have a deadline. Legitimate companies don't use these aggressive tactics. To be sure you're not getting into a scam, always verify that companies are actually tied to the Department of Education.
4. They ask for personal account information
Companies that are pulling a scam will sometimes ask for your Federal Student Aid (FSA) ID and/or password.
Anyone who has your ID can sign legally binding documents, so it's important to not give this information to anyone, even if they claim they can help.
5. Their communications are full of grammatical and spelling errors
Emails, ads, and other communications you see that are riddled with grammatical and spelling errors should be a clue that something's not quite right. If a company is truly a professional entity, their communications should be formal, accurate, and well-written.
What to do if you think you've been scammed
If you've been been scammed by one of these companies and have given them information or payment, here's what you can do, according to the U.S. Department of Education.
- Change your FSA ID and password. Don't share this new login information.
- Contact your loan servicer and tell them what happened. Ask about recent activity to make sure no one took unwanted actions, then ask them to revoke any third-party authorization agreement that the company may have placed.
- Contact your bank and credit card company and ask them to stop payment to that company.
- File a complaint to the Federal Trade Commission, which is responsible for handling fraud, identity theft or an unfair business practices. Visit ftc.gov/complaint.
- File a report of suspicious activity to the Federal Student Aid Feedback System.
See also: How to Avoid Student Loan Relief Scams