What are common Student Loan scams and Red Flags?

Let’s start with the Red Flags

Paying Large Upfront Fees

Technically speaking, no one is ever required to pay anyone else to manage any part of their student loans. These are just like any other loans and bill payments you have every month. Most of us pay them pretty easily online or even send checks in the mail if you’re old school. If a company is charging you a fee, make sure to fully understand what that fee is for, and the entire scope of their services. If they are vague with ANY details, that is a serious Red Flag. Anything that could ever need to be done with your student loans can be handled by you directly with your loan servicer. That is a fact.

Pressure

Are one of these companies putting pressure on you? If so, then you should run – not walk – in the other direction. If someone TRULY has your best interests in mind they will do what’s best for YOU. They’ll ask you questions, not tell you what to do. And you should be able to make calculated decisions at your own pace, not when they want you to…. especially when additional payment may be involved. Remember, you’re trying to reduce your financial burden, not add to it!

Who’s Calling?

Did they reach out to you, or did you reach out to them? Either way, you could end up talking to a predatory scam company. However, it’s more likely a scam if they reached out to you without you ever requesting contact. This means they are likely robo-dialing as many people as possible, just playing a numbers game; trying to get as many “fish” on the hook as possible. I used to get Student Loan auto-calls all the time… and this was YEARS after I had paid off my student loans completely. They don’t care who it is, they just want your money.

Asking for your personal information

If anyone is asking for your sensitive personal information, such as:

• full name
• address
• date of birth
• social security number
• FSA ID

… these are all Red Flags. Especially if they are asking you for this prior to officially engaging in a service agreement. All of this information can be used to commit identity theft, and many of these companies sell personal information for profit.

The Devil’s in the Details

Anytime you consider hiring a company for any service, you should be entitled to ask as many questions as you feel comfortable with. If this company will not answer your questions, limit your questions, or provides vague answers, that is a lack of transparency and they should not be trusted.

What do the scams actually look like?

“We can forgive your loans!”

Listen to Obama, my friends. Only Federal Student Aid can forgive your federal student loans. Occasionally, there are State programs that also may benefit you. Not only that, only a finite number of federal student loans are eligible for forgiveness, to begin with. If your loans are not with a Federal Loan Servicer (private bank, credit union, online lender, etc), those are considered “Private” Student Loans, and no one on Earth can forgive your Private student loans (Well, maybe Elon Musk or Jeff Bezos). These scam agencies also cannot directly lower your payments or reduce your overall loan balance in any way.

Pay Us and We’ll Pay your Loan Servicer

Payments should NEVER be made to a 3rd party. They should only be made directly to your Lender. Any company asking you to pay them, so THEY can pay your loan servicer is likely skimming off the top (keeping part of your payment for themselves), or not paying your servicer at all. This could result in serious late payment fees, higher interest, and other penalties, including your loans, becoming delinquent or defaulted (aka Bad News!).

So what do I need to do?

To avoid student loan scams there are some preventative measures we recommend for you.
In case you have already been a victim, read our expert’s guide on what to do.