Student Loan Repayment Scams (and How to Avoid Them)

The rise of student loan debt relief scams has been prominent in recent years. These scams are harmful to student loan borrowers. Read on to understand what these scams can look like, and more importantly, how to make sure to avoid them.

Why do companies do this?

Student loan debt relief scammers seek money and control over borrowers' accounts. Many of these companies seem to be connected to each other. They attempt to convince borrowers to pay for free repayment assistance services already provided by their federal loan servicer. The payment structure, between high initial upfront costs and monthly fees, can be quite lucrative. The goal is to collect a large amount of money up front and, in the process, trick borrowers into thinking that some, or all, of their money is going toward their loan debt. In reality, none of it is.

What are common tactics scammers use?

• Most scammers will reach out to borrowers by phone call, email, text messaging and/or social media offering false loan forgiveness programs or offering to lower a borrower's student loan payments.
• Scammers claim to be a part of the federal government, or connected with a borrower's loan servicer, and use affiliated logos.
• High pressure sales tactics are used, asking for a lot of borrower information, such as loan debt amount, SSN, usernames and passwords, and telling borrowers they need to act now to take advantage of the offer.
• Scammers will try to obtain borrower's information to make changes to the borrower's account and thereby prohibiting the borrower's access to their own account
• Often there are offers to make payments on the borrower's behalf, but those funds are stolen from the borrower instead, causing the loan to become delinquent

How can you tell if something is a scam?

Look for some of these red flags:

• An offer of immediate loan forgiveness
• Asking you to pay a fee to help with your loans
• Requesting your FSA ID
• Advertisements on social media or search engines
• Any offer urging you to act quickly
• Inaccurate information about you  

How can you protect yourself?

• Never sign up for something unless you have time to research it more.
• Make sure to ask questions. What are the true benefits? Why can't your student loan servicers provide them? What makes this offer different?
• Read everything you are asked to sign.
• Be vigilant about not giving out your student loan information. If someone is asking you for it, it's most likely not legitimate (unless you made the outreach yourself).
• Keep track of all communications. And know all your options. Nothing that these companies provide you is anything different than what your servicer can provide.

What if you've already responded to a scammer unknowingly?

Immediately notify your federal student loan servicer. The servicer can provide you next steps and put a flag on your account. (If you need help locating your federal student loan servicer, log into your account at studentaid.gov). Also contact your bank to prevent any (further) payments to the scammer. Change any personal information (such as usernames and passwords) that you shared.

How can a borrower report a scam?

There are several ways to report a student loan debt scam. Borrowers can report a scam to the Federal Trade Commission here. They may also contact their federal loan servicer, their state's Office of the Attorney General, or their state's Office of the Inspector General.

Where can you get more information?

• Federal Student Aid has a reputable resource to find out more information about scams and how to protect yourself.
• In addition, many student loan servicers have information right on their site.
• The FTC also has information about these companies and some things to be aware of.
• Finally, studentloanscam.com has lots of information about what to look for, tactics, etc.

And remember, if you're struggling with federal student loan repayment, you may be eligible to enter into an income-based repayment plan with a lower monthly payment, or even deferment. Check with your federal student loan servicer for details and options.