10 Student Loan Scams to Avoid As We Enter the New Year
Avoid these 10 student loans scams online criminals are using to gain personal information from people who can't afford to repay their student loans.
Dec. 28 2021, Published 7:57 a.m. ET
Paying for a college education or finding help to pay down student loan debt can be challenging. This is especially true now with the financial hardship the COVID-19 pandemic has brought on for millions of Americans.
If you’re a current student and are looking for financial help to cover school-related costs or you’re a former student who needs help managing your student loan debt, beware of the scammers that are targeting people like you. There are several scams circulating the internet, 10 of which we’ll discuss in depth.
10 student loan scams you need to be aware of
1. The Quick Student Loan Forgiveness Scam
Although the Biden administration has decided to extend the student loan payment pause date through May 1, 2022, scammers are preying on people who are scrambling to find ways to get back on track with their payments. If you come across a company that promises to wipe out your student loan debt, the FTC (Federal Trade Commission) says to watch out—this can't be done.
Companies that promise to get you enrolled in a student loan forgiveness program or “get rid of your loans before they know the details of your situation” should also be avoided as they are likely scammers. Only select types of federal student loans can be forgiven, and certain qualifications must be met before some or all of your student loan debt can be erased.
2. The “Guaranteed” Financial Aid Scam
Not everyone qualifies for financial aid. It’s a hard pill to swallow but it’s the truth. If a company contacted you via email, text, or phone, and it says it can guarantee to get you financial aid, it's a scam.
3. The “Too Good to be True Program” Scam
If you come across a company that is making promises that seem too good to be true, like getting you financial aid after your FAFSA application determined you don’t qualify, it probably is. Any time something sounds too good to be true, it's best to avoid—it's likely trouble.
4. The Biden Loan Student Loan Forgiveness Scam
As much as we’d like to hear Joe Biden say he’s canceling all student loans, it hasn’t happened yet. Although Biden has answered many Americans’ prayers by pushing the student loan pause date back to May 1, 2022, he’s not extending any sort of student loan forgiveness programs. If you’re contacted by a company that's advertising a Biden student loan forgiveness option, don’t walk, run.
5. The Pandemic Grant For Students Scam
There's no pandemic grant being offered to students right now. While the Higher Education Emergency Relief Fund allowed for stimulus checks to be provided to students of certain schools, there isn’t a pandemic grant you can sign up for to collect a quick check. Beware of companies that ask for banking information in exchange for a grant. It’s best to apply for a grant from a reputable company or through the U.S. Department of Education.
6. The Up Front Fee Scam
The U.S. Department of Education offers a substantial amount of free information online, as do schools and other reputable websites. If you’re contacted by a company via phone or email that's looking to collect a fee before providing you with any help, the FTC classifies this as illegal behavior. The FTC warns that if “you pay an up front fee to reduce or get rid of your student loan debt, you might not get any help—or your money back.”
7. The “I’m Affiliated with the U.S. Department of Education” Scam
Although your student loans may have been handed off multiple times to different loan servicers, there aren’t any companies affiliated with the U.S. Department of Education that can assist you with student loan forgiveness, reports Forbes.
If you qualify to have some or all of your federal student loans forgiven, you can go directly through the U.S. Department of Education to do this. Any companies that contact you claiming they are affiliated with the U.S. Department of Education should be avoided and reported.
8. The Student Loan Negotiator Scam
Student loan debt isn't the same as credit card debt. While you can contact a debt collection agency to negotiate the credit card debt that was sold off due to nonpayment, student loans cannot be negotiated, according to Forbes.
If you owe $20,000 in student loans, $20,000 is the amount the government will be expecting back (that is, unless your loans qualify for cancellation or forgiveness). That said, avoid any companies that suggest they can negotiate your student loans on your behalf. It simply cannot be done.
9. The “Act Now, Time is Limited” Scam
Fraudulent companies will often use pressure tactics to convince you to hand over personal information or your hard-earned money. The FTC warns you to avoid companies that use paid advertisements or seminars to make you feel as though you need to act now to avoid missing out on a once-in-a-lifetime opportunity. Chances are, the company is overextending itself and will either take your money and run or use your personal information for its own personal gain.
10. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Loan Forgiveness Program Scam
Another fake program scammers are trying to use as leverage to gain access to confidential information such as your FSA ID, your Social Security Number, or your bank account is the CARES (Coronavirus Aid, Relief, and Economic Security Act) Act Loan Forgiveness program. The fact is, this program does not exist and the only way to get some or all of your student loans forgiven given you qualify is through the U.S. Department of Education.
When you’re in a bind and need help covering school expenses, it’s easy to fall victim to the numerous scams that seem to only target you. The same goes for those who can't afford their student loan payments. Although desperate times can lead to you making mistakes, consider the information above before handing over information or money to a company you haven’t had the time to research.