Recently, there has been an increase in the rate of complaints from students who have fallen victim to fraudulent schemes disguised as student loan forgiveness plans. These victims are lured by frauds offering an extension or forgiveness of such loans and end up losing hundreds or thousands of dollars in the process.
It’s often hard to distinguish the scammers from the real agencies, which has led to the ease of operations by those scammers who prey on innocent victims. As alarming as this is, it can be prevented, and indeed there are ways you can avoid falling for student loan forgiveness scams.
So read on as we discuss the critical factors about student loan forgiveness, the various forms scammers take to lure unsuspecting individuals and the best preventive measures against such scams. So, to get started, what is student loan forgiveness?
What Is Student Loan Forgiveness?
In simple terms, student loan forgiveness is the legal process that relieves borrowers of their obligations to repay all or part of their student loan debt. So, if you took out a loan in the past to fund your post-secondary education and still can’t repay it, a student loan forgiveness helps relieve you of this obligation.
But this doesn’t mean that just anybody can hop on the student loan forgiveness scheme. This forgiveness plan is available only to public types of loans, and the eligibility is made available to people in public, educational, and military services.
For example, in our article on where to move after college, we’ve mentioned student loan forgiveness program availability as one of the factors for consideration. Another example is a nursing internship (Northwestern Memorial Healthcare) that has loan forgiveness options as one of the benefits.
So, you can see that student loan forgiveness is not for everyone, and this is the first step to deducing scams when you see them. With the knowledge of student loan forgiveness in mind, you can now learn about how you can be scammed.
How Do You Spot Student Loan Forgiveness Scams?
It’s one thing to be cautious about every mail you receive encouraging you to try out different schemes and another to actually fish out the scammers on sight. For this, you need an eagle’s eye, and we have just the right tips.
So, how do you know when you’re getting scammed by fake student loan forgiveness schemes? Here are 5 ways to find out:
A Request For Personal Information
The first red flag you see when dealing with scammers pretending to offer student loan forgiveness is their request for your personal details. The personal information includes details about your Federal Student Aid ID and Social Security Number.
This allows them to log into your account and act on your behalf with or without your knowledge. They even go as far as requesting a power of attorney in the guise of working with your loan servicer. However, doing this will only give them the power to make financial decisions on your behalf, and you can lose hundreds or thousands of dollars.
It’s important to note that legitimate student loan counseling agencies will never ask for such information.
A Promise Of Immediate And Total Student Loan Forgiveness
This is one method that usually catches unsuspecting borrowers off-guard. These scammers promise immediate relief of your loan to lure you into participating in their schemes. This is a prominent bluff because, in the first place, student loan forgiveness isn’t for everyone.
As a borrower, you need to work for the government or public service and make monthly payments for 10 years before your student loan can be forgiven. This grants you eligibility for loan forgiveness by Public Service Loan Forgiveness agencies.
For borrowers on repayment plans, a period of 20-25 years of payment is the minimum needed for the total forgiveness of your student loans.
So, the promise of immediate loan forgiveness is one obvious red flag to look out for.
A Demand For A Fee To be Paid Upfront Before Services
While there’s nothing wrong or illegal about a company requesting a consolidation fee or charge before rendering their services, the issue arises when such is a student loan forgiveness agency.
Because there’s nothing these companies want to do for you that you can’t do for yourself, the very act of such companies asking for upfront or monthly payments has been deemed illegal, and you should do well to steer clear.
The Use Of A Sales Pitch
For you, getting your loan forgiven is a necessity. For the scammers, it’s a business scheme. This is why they go as far as pitching a too-good-to-be-true offer for you. You can also sense the urgency in their pitches as they continually seek an immediate response.
However, a legitimate agency will always prioritize your understanding of the processes over your immediate response.
The Use Of Social Media And On-Screen Ads.
At this point, you know these scammers are getting desperate. You begin to see social media posts and website ads about their services, which look good to the eyes but are far from legit.
What To Do If You Spot Student Loan Forgiveness Scams
Now that you’ve spotted a student loan forgiveness scam attempt, what do you do? Here are the various ways to prevent student loan forgiveness scam attempts:
- Avoid giving out personal information to companies claiming to provide loan forgiveness services.
- Enroll in an income-driven loan repayment plan which you can use to clear your loans over time. You can also learn more about student loan forgiveness plans by visiting the student aid website.
- Constantly monitor your student loan forgiveness plans using your Federal Student Aid account.
- Be sure to conduct proper research on any company offering loan forgiveness services to better understand the company and its legitimacy.
- Never disclose your FSA ID details or sign a power of attorney contract with any third party.
- Be sure to ask the companies relevant questions, such as affiliations with legitimate loan agencies. An honest company will always be straightforward about its services.
The last thing you need is to incur more debts or lose money trying to pay off the money you already owe. That’s why the tips above are necessary steps to take to prevent student loan forgiveness scams.
As a student, there is a way for you to cut some of the college expenses down, and that’s when a textbook rental comes into play. By the way, textbook rental is one of the ways to reduce your college costs.