5 warning signs of student loan forgiveness scams
On average, college students in the U.S. graduate with more than $30,000 of student loan debt. And, unfortunately, dozens of private companies try to take advantage of this to lure unsuspecting borrowers into bogus loan forgiveness programs every year.
According to a recent investigation from NerdWallet, more than 130 companies have a history of scamming student borrowers with promises of loan forgiveness — and the Consumer Financial Protection Bureau recently closed 4 companies that it discovered were operating illegally.
You need to be wary of companies which promise services aimed at student loan forgiveness. Fortunately, there are some tell-tale signs that a company isn’t working with your best interests in mind. Here are 5 warning signs that a loan forgiveness program is a scam:
1. They charge upfront or monthly fees
Although it’s not illegal for a debt relief company to charge for their fees, it is illegal for them to collect those fees over the phone before they lower or settle your loans. If they try to do this, hang up the phone. If you’re not sure, go to studentloans.gov to learn about legitimate government forgiveness plans (or to consolidate your loans). Note that these services are offered free-of-charge. If you have a private loan, contact your lender to discuss your options.
2. They promise immediate results
Legitimate loan forgiveness programs apply only to some individuals, like those who are willing to work for the government or a 501(c)(3) non-profit organization—and they usually require that you make monthly payments for a minimum of 10 years before your loan is forgiven. If someone tells you they can forgive your loan immediately, or if their program has a suspicious name (like “Obama student loan forgiveness”), go to the federal student aid website to see if they’re legitimate. You can also see if the company name is on this Student Loan Watch List. Above all, don’t give them your money until you check them out.
3. They pressure you
Legitimate loan forgiveness programs never pressure student borrowers — they provide you with information and let you make up your own mind. Scammers use sales representatives who earn a commission for each customer they sign up, and often apply pressure or create a sense of urgency to get those new sign ups. If someone calls you saying things like, “This offer will expire in one week,” don’t trust them.
4. They ask for personal information
Some scammers, instead of trying to get you to pay upfront fees, ask for personal information (like your social security number of federal student aid ID) so they can hack into your account and make decisions for you. Legitimate forgiveness plans never ask for this kind of information. If someone asks for your personal information, don’t give it to them.
5. They advertise aggressively on the internet
You might see loan forgiveness paid ads on social media or when you search for information on search engines like Google. You should view these ads with skepticism. Rohit Chopra, student loan ombudsperson for the CFPB, talks about the pervasiveness of these ads, and their danger:
“While we have warned consumers about these scams, we are concerned that unscrupulous companies may be using aggressive advertising through search products to lure distressed borrowers.”
Don’t click on these kinds of ads unless you’ve done adequate research and know they’re legitimate.
It’s important to be careful when attempting to consolidate your student loans or to have them forgiven. If you encounter a scammer, you should immediately contact the CFPB, the FTC and your state attorney general’s office. Doing so could prevent other students from falling prey to unscrupulous scammers.
At Chattanooga College, we believe students deserve an education they can afford. That’s why we offer financial aid for those who qualify, and offer career training to help build a future in dental assisting, computer networking, criminal justice, medical assisting, cosmetology, and more.
To learn more about Chattanooga College, or about any of our programs, contact us today.