Student Loan Forgiveness Scams: Red & Green 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.

Green Flags 🟢

In rare cases, a company may be more legitimate if they are charging a very small fee to give you 1:1 consultations to answer your questions, help you fill out paperwork, or review forms to make sure they’ll be accepted. These are typically going to be registered 501(c)3 Non-Profit organizations or widely known Advocacy Groups.

These types of organizations help you submit forms electronically to your loan servicer, and provide confirmation. They’ll take as much time as you need to answer questions, no matter how trivial. They might be recommended as Student Loan Experts by someone you know. In these cases, their knowledge and guidance is valuable, but they still have no control over your loans. Said another way, no control = much less risk.

Another Green Flag is Transparency. If they are willing to go to bat for you on the phone with your loan servicer and ask questions you might not think to ask, and they clearly have your best interests in mind, then this might be worth a small Fee. In general, if they are asking for large amounts of money upfront, and you are not 100% sure what that payment is for, it’s better to play it safe and not pay.

In case you have already been a victim, read our expert’s guide on what to do.