Student loan scams are everywhere. Whether you’re a high school senior looking for the best interest rates and terms on loans to fund your college career or you’re a college senior about to graduate and start paying off your debts, scammers are waiting to try to take your money.
In a moment we’ll get to student loan scams related to paying your loans back, but first let’s discuss the kinds of student loan scams to look out for if you’re in the process of finding and applying for student loans.
Paid Searches for Financial Aid
Scammers offering to research financial aid and scholarship opportunities for you often charge up to $1,000 for their “services”. First of all, the information they obtain for you can be found for free online. Second, they may have a “money-back” guarantee if they don’t find aid for you, but they will consider their end of the bargain fulfilled if they procure a $200 scholarship for you. It would be better to put your money toward paying for college, rather than paying for scam “services”.
Paid FAFSA Services
FAFSA is the Free Application for Federal Student Aid. Anyone who claims that they can streamline the process or get you better results for a fee is a scammer. You can get assistance in filling out your FAFSA online at FAFSA.ed.gov or through your school’s financial aid office. Anyone charging for these services is, at best, going to take your money. At worst, they may not only charge you for free services, but they may also steal your personal and financial information.
Scholarship Scams After You Graduate
If you are graduating from college soon, you know that you probably have just a few months left before you have to start paying off your student loans. Taking on that burden can be scary, especially in today’s uncertain economy, where students often don’t know if they’ll have a good job six months after they graduate. Unfortunately, just feeling this pressure can open you up to something much, much worse.
Student loan scams use students’ fears of financial hardship and the burden that comes with student loans to prey on them. It’s all too common, and it affects recent graduates at an alarming rate. So, how can you avoid student loan scams? Learn to recognize them and don’t fall for their tricks.
The Consolidation Scam
If you’re like a lot of students, you have more than one student loan, and you’re not looking forward to keeping track of several different monthly payments. Along comes a company that’s ready to make your day! They claim that – for a “small” fee – they can consolidate all of your loans into “One low monthly payment!”
If you see this kind of offer, in any form, walk away immediately. Don’t open the email. Don’t click on the ad. Don’t give the nice salesperson even five minutes of your day. Why? Because this is a classic scam.
External companies cannot consolidate federal student loans. They can only be consolidated through the Federal Direct Consolidation Program, which you can do for free from your computer in less than 20 minutes. If you agree to a consolidation, they will do one of three things.
- Take your money and do nothing.
- Take your money and steal your identity.
- Take your money and move your loan to a private lender with higher interest rates and worse terms.
The “Debt Relief” or “Debt Forgiveness” Scam
Preying on wishful thinking and naiveté, these scammers base their cons on current events and news about debt forgiveness. One went so far as to call their program the “Obama Forgiveness Program”. Do not trust anyone who claims that they can make your student loan debts disappear. Whether they’re charging a fee or asking for personal and financial information, they are either trying to steal your money or your identity.
The Up-Front Fee Scam
You might also run into a company that claims it can permanently lower your interest rate – you guessed it – for a fee. Again, this is not a legitimate offer. The only result of paying them will be less money in your bank account. If you want a lower interest rate on your loan, talk to your lender about refinancing. You may be eligible to change your terms and either decrease your monthly payment or increase the amount you’re paying on your principal while decreasing your interest rate.
In general, always be wary if a third party approaches you about your student loans. If you are uncertain if a company is scamming people or not, don’t hesitate to do some research on them. Google their name and add the keyword “scam”. Call your lender, and ask if anyone else has reported this company approaching them. If you find that you’ve been approached by a scammer, report them to the Better Business Bureau. Whatever you do, do not give them any information, especially your credit card info.
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TuitionChart.com works hand-in-hand with the best, most trusted names in private student lending to help students and their families find the money they need for college. Through use of comparison tools and loan searches, TuitionChart provides over 20 different loan options for students. TuitionChart.com is designed to help students and their families wend their way through the maze of financial aid information.