Student Debt Scams Revealed
Student debt is at an all-time high, with borrowers owing a combined $1.5 trillion - surpassing both credit card and auto debt. Moreover, the average graduate walks out owing $30,000. With so much debt, it would be normal to assume that a portion of borrowers may be struggling with their payments. That’s where student loan scam calls come into play. These companies call borrowers and offer false promises of “eliminating” student debt or lowering their monthly payments, borrowers who aren’t aware get their hopes up and may fall victim to one of these scams. These companies do not offer any debt-relief and are oftentimes looking to take advantage of borrowers.
How to identify a scam call
These companies will often call, email, or text borrowers promising to erase their student debt. These are some of the signs that should raise a red flag:
- They ask for upfront fees: they cannot ask for any upfront or monthly fees as it is illegal - companies cannot charge for a service you could do yourself for free. They may even go as far as to ask for your credit card number or bank account, so be careful with sharing sensitive information!
- They promise immediate cancellation: no company or individual can promise immediate cancellation. The most popular program which is the Public Service Loan Forgiveness takes 10 years of working in the public sector or a nonprofit to get debt forgiveness, and other forgiveness programs take years as well. No one can erase debt like they promise!
- They ask for your federal student loan ID: if they have your ID number they can go into the federal system and make unauthorized alterations to your account.
- The offer is limited and you should act immediately: they do this to instill a sense of urgency in the borrower to incite them to act fast.
- They reference “changes” between the previous administration’s rules and a new set of rules: programs like “Obama student loan forgiveness” do not exist. They are basically marketing terms to trick users into revealing their information.
What to do if you fall victim to one of these scams
If you happened to fall victim to one of these scams - you are not alone, and there are measures you can take. According to the FTC, debt-relief scam companies have collected over $95 million in illegal fees. In order to ensure the safety of your account, you must complete the following:
- Change your FSA ID and do not share the password with anyone.
- Contact your loan servicer to make sure no unwanted actions were taken on your behalf.
- Contact your bank and ask that payments to that company be stopped, or ultimately request a new credit card.
- File a complaint through the FTC complaint line.
This does not mean every student loan service is a scam. For a list of safe and vetted loan servicers approved by the Department of Education click here. There are private student loan services that may take a look at your loan portfolio and refinance them if necessary.
At Snowball Wealth we take a look at your full loan picture and provide personalized goals and recommendations on how and when to pay off debt. We compare against refinancing, optimizing payments and federal programs to ensure our users make the best decision for their situation. To be a part of our completely free Beta click here.
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