How to Spot a Student Loan Repayment Scam


How to Spot a Student Loan Repayment Scam

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The other day I received a phone call from a number that I didn’t recognize. Usually, I know better than to answer these, since they’re often people calling about an extended warranty on a car than I no longer own, but as a creature of habit, I picked up anyway. I’m fairly certain the woman on the line who identified herself as “Donna” was actually a robot or a recording, since she didn’t respond to anything that I said. Her voice had that tinny quality that’s all too common when you get a robocall. Still, I listened for a minute. You never know.

“Donna” said that she was calling about my “student loan reduction application” and wanted to inform me that I’d been approved for “complete forgiveness.” It sounds great, right? Who wouldn’t want to never have to make a student loan payment again? Except that I never submitted a student loan reduction application. In fact, I don’t even have any student loans. I hung up.

For me, spotting that student loan scam was easy. But for people with federal student loans who may be exploring forgiveness options, it’s not hard to imagine that they would seek more information. Unfortunately, there are numerous companies that aim to take advantage of students with student loans. They claim that they can help you shorten the life of your loan, lower your payments, or eliminate your payments altogether, but unfortunately, they’re just after the money in your bank account—the money you think is going toward your loan payments just lines their pocket, and your debt will continue to grow (while your credit score tanks).

Remember, if you are working with a Department of Education loan servicer, or one affiliated with the Department of Education, you will never have to pay any management fees. If you’re unsure who your official loan servicer is, login to My Federal Student Aid. There you will find the name of the company and contact information, should you need to get in touch. If you’ve been approached (by phone, mail, email, etc.) by a company that is not your official loan servicer, do not release any of your information. Instead, contact your official servicer and make any changes to your repayment plan or consolidate your loans through them.

How to spot a student loan scam:

  • A company uses scare tactics, saying “act now” or “loan forgiveness programs are being discontinued.”
  • A company requires you to pay upfront fees.
  • A company requires you to pay monthly maintenance fees.
  • A company promises complete forgiveness or cancellation.
  • A company promises immediate forgiveness or cancellation.
  • A company asks for your FSA ID.
  • A company asks for your Social Security number.
  • A company requires you to sign a power of attorney.
  • A company contacts you out of nowhere.
  • A company advertises aggressively online.
  • A company is not affiliated with the Department of Education or one of these private collection agencies that works with the Department of Education.
  • A company makes grammatical mistakes in their written materials.
  • A company representative pressures you into signing up immediately.
  • A company representative says that a buyer will buy and pay off your loan.

Student debt relief companies don’t offer anything that you can’t do yourself, for free. If you are worried that you can’t keep up with your payments or wondering about loan forgiveness or cancellation, contact your current loan servicer for assistance.

What happens if you fall for a scam:

Contact your loan servicer immediately, especially if you’ve signed a power of attorney, which gives the scam company free reign over your loan payments and allows them to communicate with your loan servicer on your behalf. Tell your loan servicer that you want to revoke the power of attorney and regain control of your account.

If you’ve released your FSA ID, login to your My Federal Student Aid account and change your ID and password. Protect this information and do not release it to the scam company.

Then, call the three major credit bureaus—Experian, Equifax, and Transunion—and ask that your accounts be frozen, especially if you’ve given the scam company your Social Security number. You should also contact your bank, explain the situation, and ask them to stop any payments that are being made to the scam company, whether through automatic withdrawal from your bank account or charges to your credit card.

Finally, tell the company that you will no longer be doing any business with them. Then, report them.

How to report a scam:

You can report the company to the:

While you may not get any of your money back, catching a scam prevents the loss of any more money. To get back on track, you can work with your actual loan servicer to find an appropriate repayment plan and term length. Remember, if it sounds too good to be true, it probably is.


About Megan Clendenon

Megan C. is obsessed with Cincinnati-style chili, Louisville basketball, and Scandinavian crime fiction. She has lived in six different states and held 12 different jobs since beginning her undergraduate degree at Carleton College in 2008. The wanderlust abated somewhat in recent years, as Megan settled in Texas from 2013 to 2016 to finish a master’s degree in geosciences, write a thesis on the future horrors that stem from climate change, and get married. During her free time, you will find Megan sitting on the couch, cheering for her Louisville Cardinals, planning future adventures abroad, and snuggling with her dog, Tiger. She currently lives outside of Washington D.C.

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