How to Avoid Student Loan Scams
Struggling to pay student loans? Looking for another solution to get rid of debt? While you’re pursuing those financial goals you need to keep a sharp eye out for student loan scams.
If you are struggling, take solace in the fact you’re not alone. About 13% of Americans have student loan debts amounting to $1.36 trillion collectively. Out of the 44.2 million of those in debt, 11.2% fall to delinquency.
Student loans are almost a normal part of an adult’s life, which can remain into their middle-aged years. This can make anyone with debt desperate, especially if they weren’t as successful as they should have been with a diploma.
Student loan scams prey on this desperation. And with a huge market to prey on, there are unfortunately a huge number of various scams.
But you can take steps to avoid falling into this type of scams.
Read on to find out what are the typical scams and how to avoid them.
What Are Student Loan Scams
As the name suggests, this type of scam targets students desperate to pay off their loans fast. Student loan forgiveness scams will offer to lower the total amount you need to pay. They might also promise to eliminate the debt completely.
Do note that there are legitimate student loan forgiveness companies that can lower your debt. Student loan scams prey on people under the guise of such programs.
The scam involves them making promises to make deals or settle with your lender. But before that, you’ll have to pay an upfront fee.
They may also ask you to pay them instead of the lender. They’ll offer lower interest rates, a shorter term, or lower monthly payments. But then they’ll put your loan into forbearance.
By the time you find out about it, they’re long gone.
Watch Out for These Red Flags
Student loan scams are too good to be true, which makes them easy to spot. Here are other warning signs you need to look out for:
Official-Sounding Names or Logos
If they claim to have an affiliation with the Department of Education, it’s a scam. Keep in mind that the federal student loan forgiveness government entity doesn’t associate with third-party companies.
Look out for companies with “Federal” or “National” in their names. Scam companies can also trick you into having official-looking logos.
Asking for Upfront Fees
Student loan scams will often pressure you into making an upfront payment as high as $999. You shouldn’t have to pay anyone a ridiculous amount of money as advanced payment.
Promising Immediate Loan Cancellation
There are government programs that can offer you loan forgiveness. Typically, you would have been paying for a certain amount of time before you can qualify.
Any company promising immediate debt relief is most definitely a scam.
Requesting Your Personal Information
There are a lot of ways giving out sensitive information can go wrong, so don’t give them any personal info until you’ve verified that they’re a legitimate company.
Moreover, don’t ever sign any document, like third-party authorization or power of attorney.
Calling You For a Grant You Didn’t Apply For
Sometimes, you’ll receive a call saying that you won a grant for your education and you won’t have to pay it back.
The only thing you’ll need to do is pay processing fees. As per Red Flag #2, that’s a scam.
But receiving calls about a grant you didn’t apply for should have raised a red flag immediately.
Pressuring You into Doing Something
Sometimes, they will not only ask but also pressure you. They don’t want you finding out about them, so they’ll ask you to pay as soon as possible. They may also force you to sign documents ASAP to get your information quickly.
These warning signs are present in almost every student loan scam. On top of those, you can take further steps to ensure that you’re not falling for any scam.
How to Avoid the Student Loan Scams
Aside from watching out for the red flags, do these steps to avoid student loan scams.
While you’re on the phone, don’t let the caller take control of the conversation. Most often than not, they’ll overwhelm you with promises so you wouldn’t have time to doubt them.
They’ll also avoid questions that would give them away, so they’ll talk and talk until you’ve forgotten the question in the first place.
Be firm and ask questions about their company. If they refuse to answer directly, you’re just wasting your time on student loan scams.
Also, if they claim to be your student loan care servicer, ask them something they wouldn’t know if they were lying.
Research the Company
Don’t agree to anything on the first call. Take your time to do a little research about their company first based on the information they give you.
Use Google to search their company name, address, and even phone number. If they’re not legitimate, the search engine will have very few or no details at all about them. You can also go to student forums to see if others have heard of the company or scam.
Doing diligent research should also show you some services that should be free. For example, they’ll offer to consolidate your loans for you for a massive fee. However, if you go online, you’ll see that you can do it yourself for free.
Don’t Give Your Personal Information on the Phone
Asking for your personal info is a red flag. So, you shouldn’t provide any information no matter how legitimate a company looks.
Keep your Federal Student Aid PIN or your servicer account password safe.
Watch Out for Paperwork Processing Companies
These are companies who will process your student loan consolidation paperwork for you then charge you for it. But they won’t tell you that. Instead, they’ll make it look like they’re consolidating your student loans.
Note that applying for student loan consolidation is free on government websites. You won’t be able to go after them because they only did what they promised – and that is to do your paperwork.
Apart from these, one of the best advice we can give you is to follow your guts. It warns you that something isn’t right, which is true most of the times.
Handle Your Student Loans and Finances Like a Pro
Managing student loans can be a burden, but it shouldn’t have to. With the right knowledge and skills about financial management, you’ll be able to still live your life while paying off your student loans and other types of debt.
Contact us now for more tips and advice on how to have a fulfilling financial life without debt.
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