If you have student debt, you might receive calls or see targeted ads on social media promising to help you reduce or even eliminate your balance – for a fee.
The problem is that many of these offers are fraudulent. In some cases, companies trick people into paying fees, but don’t invest some of that money into the loans themselves. Other companies operate legally, but charge a fee for completing simple paperwork that you might as well complete yourself.
It doesn’t help that the student loan landscape continues to evolve at a rapid pace. As repayment rules evolve and the Trump administration reduces oversight of the student loan system, these companies see an opportunity to capitalize on borrower confusion, experts say.
The Hechinger Report spoke with student loan experts to find out what borrowers should know about loan forgiveness and repayment — and how to spot a scam.
What red flags indicate that an offer for loan help might be a scam?
Be wary of companies that ask for your student loan password or verification code so they can confirm your information. Fraudsters often use this access to prevent borrowers from accessing their own loan portals or to make changes without the borrower’s knowledge.
Some scammers secretly reset the borrower’s password while they are on the phone. They log into the borrower’s account and request a password change, which will send a two-factor authentication code to the borrower. The scammer, on the other hand, will say something like, “We’ll send you a code to verify your identity” and ask the borrower to share it.
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If you receive a call from a company promising a generous loan repayment program that you should sign up for today because it’s about to end, be wary. Authorized reimbursement programs don’t use high-pressure tactics, experts say.
And be wary of promises that sound too good to be true. Some companies guarantee they will get your loan forgiven, but experts say that’s not a promise a legitimate company can keep.
You should also be skeptical of any pitch that charges for student loan assistance. Borrowers can access all the benefits of the federal student loan program for free.
What should I do if I am scammed?
If you’ve signed up for something and realize it may be fraudulent, you’ll want to make a few phone calls. First, contact the Department of Education and your loan servicer and revoke any authorization you have given to a third party regarding your loan. Call your bank and turn off any recurring payments you have set up. If you have shared your password, change it immediately.
You must report the incident to the Federal Trade Commission using this formand the Consumer Financial Protection Bureau online or at 855-411-2372. It is also a good idea to leave your state attorney general’s office know.
Are document preparation companies a legitimate way to handle student loan repayment?
Some companies will charge an upfront fee of several hundred dollars and then a monthly fee to enroll you in a loan repayment plan and maintain that status. These companies sometimes compare themselves to tax preparation companies, helping you navigate government red tape.
But experts say the amount of work it will take for you to give them the information they need is the same as filling out the forms yourself.
What are my official options for reducing my student loan payments or getting my loans forgiven?
If your student loan payments are too high to handle, there are ways to reduce monthly payments and even limit the amount you have to repay. The federal government offers several plans, including income-driven repayment options that cap payments at 10 to 15 percent of your income. After 20 to 25 years, depending on the plan, any remaining balance is forgiven.
There is also a program for public employees, such as teachers, that forgives any remaining balance after 10 years.
The Ministry of Education offers a online simulator to help borrowers sort through their options. Experts also recommend using a online calculator through the Education Debt Consumer Assistance Program to explore your options.
I was enrolled in the SAVE plan and heard it was recently removed. And now ?
In March, a federal judge issued a ruling that effectively ended the SAVE plan, a Biden-era income-driven repayment program. The 7.5 million borrowers enrolled in SAVE must now move to another plan, and if they don’t, the government will choose one for them.
Above all, if your participation in the SAVE plan allowed you to suspend your loan repayments, you must now start paying again.
If you were in the SAVE program, you will receive a notice from the Federal Department of Education in July stating that you need to change plans. The memo might call SAVE an “illegal” program, as the department has repeatedly said, but you did nothing wrong if you signed up for this program while it was available.
Where can I go if I have specific questions about my student loan?
The best first stop is student aid.govsay the experts. Your loan servicer, the company that services your loan, is also a good source.
Bonnie Latreille, a student loan mediator at the Department of Education’s Office of Federal Student Aid under the Biden administration, also recommends learning about other free options, including experts from nonprofit organizations. A group to try is the Institute of Student Loan Advisorswhich claims to help 20,000 student loan borrowers each year.
“Borrowers should never pay for help with their student loans,” Latreille said.
This story about student loan forgiveness scams was produced by The Hechinger reportan independent, nonprofit news organization focused on inequality and innovation in education. Subscribe to our higher education newsletter. Listen to our higher education podcast.
The article How to Recognize Student Loan Scams and Protect Yourself appears first in the Hechinger Report.
