Desperate Times Call for Student Loan Scams
Every second America’s collective student loan burden grows by $2,726. If you’re feeling brave, you can even watch the thirteen-figure grow in real time by clicking here.
It’s becoming an increasingly desperate situation for graduates who are attempting to jumpstart their lives, but are held back by huge student loans. And what goes hand-in-hand with a desperate financial climate? Scammers, of course.
You may have seen them on TV, billboards, or the internet. Maybe you’ve heard their commercials on the radio. They’re the ones claiming to be able to lift you out of default in “one quick call!” or offering to slash your debt in half within seconds. Student debt relief scammers are on the rise and are making their presence known through all sorts of channels.
To young adults who fantasize about life without debt, a student loan refinancing program might seem, at first, like a dream come true. Unfortunately, many of the less-than-reputable companies are offering services for hundreds – or even thousands – of dollars that students could be getting *for free* from the government.
For example, a common scam comes in the form of companies charging fees of up to $1,600 to restructure a student’s loans into a single package. That’s a lot to pay considering the fact that you can consolidate federal loans through the U.S. Department of Education for exactly $0 in fees or setup costs.
One reason so many young adults may be turning to scam artists is because their “services” are so much more public and available than anything provided by the Department of Education. If a recent graduate needs help fast, a scam artist is likely to find them before they stumble upon a source of legitimate information.
It isn’t always obvious where a borrower should turn to for help. In a recent interview with the Washington Post, Illinois Attorney General, Lisa Madigan, called out student loan servicers, saying that they are “failing to adequately counsel borrowers about available options… This vacuum of information and legitimate assistance has provided an opportunity for scammers to fill the gap.”
In response to this issue, Madigan and others are challenging the Department of Education to do more when it comes to protecting borrowers and making information about refinancing readily available for those who might be searching.
While public servants like Madigan are making strides towards a safer student loan arena, what can borrowers do in the meantime to avoid scams? Fortunately, the ever-excellent NerdWallet has compiled a list of some of the ‘warning signs’ to look out for when scoping out a debt relief program. Here are some of their red flags to keep an eye out for:
• You have to pay to get help – the Department of Education is always available to counsel you on your loan repayment – free of charge! An upfront fee indicates that the company is for-profit. Tread carefully, friends.
• ‘Federal,’ ‘national’ or other official-sounding words in a private company’s name – if a website is trying to make you think it’s part of the government and/or the Department of Education, and it isn’t – watch out! Be careful about giving them any sensitive information (like your social security number), and remember that certain services can only be provided by the federal government. Your best bet is to work directly through your student loan servicer.
• They make promises to provide immediate relief, forgive student loans outright or get you out of default – remember: loan forgiveness doesn’t happen overnight!
• It’s being advertised on social media, on the radio, or at the top of your search engine results – for-profit, predatory loan scams are famous for aggressively marketing their services.
Just as predatory mortgage servicers, payday lenders, and other scam artists have sought to make money off of those desperately seeking financial help, student loan scammers are kicking people while they’re down. And on top of it all, those who have been harmed by debt scammers may be less likely to seek help from legitimate sources in the future.
Remember that there is honest, safe counseling available. Play it smart, do your research and you should have no trouble avoiding a student loan scam.