10 Student Loan Forgiveness Scam Warning Signs You Should Know
Sometimes, when a deal seems too good to be true, it is. This article lists warning signs you should look for regarding student loan forgiveness.
Many borrowers with student loans are eager to repay their debt as soon as possible. Unfortunately, this often leaves them prone to falling victim to student loan forgiveness scams.
The good news is, you don't have to lose your hard-earned money or put your identity at risk if you know the most common signs of a student loan forgiveness scam to look out for. In particular, here are ten red flags that you should be watchful for so you can avoid making a costly mistake when aiming to save money on your educational loans.
1. Up-front fees
Legitimate student loan forgiveness companies or student loan refinancing companies do not charge upfront fees. In fact, it is illegal for companies to charge you for assisting with student loans before they actually do anything to help you. If you're being asked to pay a fee to lower your rate, consolidate your loans, or take any other steps to manage your educational debt, this is a major warning sign that you're being scammed.
2. A promise to get loans forgiven immediately
While there are some legitimate ways to get student loans forgiven, such as Public Service Loan Forgiveness, all of these methods of wiping out your debt can take time. If a company is promising to get your loans forgiven right away, they are making a pledge they can't keep -- which is a serious red flag that you should avoid doing business with them.
3. A promise to get debt canceled or discharged
Student loan debt is subject to special laws that make it more difficult to discharge in bankruptcy. Lenders or bankruptcy courts don't just cancel debt because a student loan forgiveness company asks them to. Any company that says they can definitely erase your debt is likely perpetrating a student loan forgiveness scam.
4. Guaranteed removal of accurate information from your credit report
If you have been late with your payments or defaulted on your student loan debt, this could hurt your credit. While it may be tempting to try to work with a company that promises to reverse this damage, unfortunately, this is one of the most common student loan forgiveness scams.
The reality is that legitimate negative information will not be removed from your credit record, and there's no business out there that can promise otherwise.
5. A demand to sign a "power of attorney" or similar document
If you're asked to sign a power of attorney or a third-party authorization form, you're giving the company legal authority to deal with your loan servicer and manage your loans on your behalf. You are giving up way too much power and control over your finances, and legitimate student loan forgiveness companies will not ask for this.
6. Requests for your Federal Student Aid ID
Your FSA ID is sensitive information. There is no reason for a refinance lender or loan forgiveness company to have access to it, and if you're asked for your user name or password, you are most likely being scammed.
7. Claimed affiliation with any government agency
Third-party student loan forgiveness or refinancing companies are not affiliated with the Department of Education or any other government agency, and they should not pretend to be. If you need to make changes to your federal student loans, including modifying your repayment plan, you should visit the official Department of Education website (with a .gov) address in order to do so.
8. Claimed affiliation with your student loan servicer
Your student loan servicer is not going to solicit personal information or promise to forgive your loans for you, and they aren't going to partner with a company that does. If someone contacts you claiming to be working with your loan servicer to help you get your loans forgiven, you can safely assume it is a student loan forgiveness scam.
9. High-pressure sales tactics
Legitimate companies that help with student loan issues don't try to pressure you into making quick decisions -- especially without taking the time to read over all of the information they provide. They aren't going to aggressively try to sell you on their products, aim to frighten you into paying them money, or make promises that sound too good to be true. Any type of high-pressure sales tactic should be a major red flag.
10. Requests for your Social Security number
You should not be asked to provide your Social Security number in order for a company to provide you with information or offer assistance in dealing with your student loans. The only time you should provide this personal identifying information is if you've carefully researched student loan refinance lenders and have decided to apply for a refinance loan.
How to make loan repayment easier without falling victim to student loan forgiveness scams
If you have federal student loans, you do not need to work with any business to get your loans forgiven, including any legitimate student loan forgiveness companies. Loan forgiveness options -- including those available for public service work or after making payments on an income-driven plan -- are spelled out on the Department of Education website.
Private student loans, on the other hand, cannot be forgiven. But you can reduce your interest rate and make repaying these loans easier by refinancing your debt. Since you are refinancing with another private student loan lender, you don't have to give up any borrower benefits in order to do this. And if you can qualify for a new loan at a lower rate and with more favorable terms, you can make payoff more affordable in many situations.
Juno can help you to refinance your student loans at the lowest possible rate. We get together groups of borrowers and make lenders compete for their business. By harnessing the power of collective bargaining, we help each individual borrower get the most affordable loan possible.
Christy Rakoczy Bieber
Christy Rakoczy Bieber is a full-time personal finance and legal writer. She is a graduate of UCLA School of Law and the University of Rochester. Christy was previously a college teacher with experience writing textbooks and serving as a subject matter expert.
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