With the ever-increasing cost of college, many students have the need to take out a student loan to pay for college. Sometimes, federal student loans are just not enough and many students end up having to cover the shortfall by applying for private student loans. While there are several legitimate and reputable private lenders, there are also several unscrupulous individuals and organizations that try and cash in on this trend.
The unfortunate truth is student loan scams are rampant—unsolicited phone calls, e-mails, pop-ups on web sites, and plain old “snail-mail” flyers offering to reduce or forgive student debt are increasingly common. So how do you know what’s legit and what’s not?
These tips will help you avoid falling victim to these new and costly scams:
You Can Get Help for Your Loans Without Paying Anything
Yes, that’s right, you can get any help you need regarding your loans for free. Student financial aid officers, loan officials in banks, and even people who work on-campus in the local bursar’s office can give you names of reputed lenders or help alleviate some of your student loan debt at absolutely no cost to you.
If you have a federal student loan from the US Department of Education, all you should do is call them and they will help you. Some student loans don’t have to be repaid until you graduate, and others may not have to be paid until you have a paycheck.
You Should Never Pay an Advanced Fee
If a student loan company tells you to pay a “small” fee upfront before they can lend you any money, it’s a scam. Leave the office or hang up the phone. Close out that browser chat window. Just don’t send them any money. The federal government never asks students for money up-front. Reputable private lenders will also never ask for upfront fees on student loans.
Loan Consolidation Scams
Depending upon your situation after graduation from college, consolidation might make sense. This one is tricky, however, and you need to do careful, thorough research on whether this option is right for you. (Click here to learn about 6 of the best reputable lenders who can consolidate / refinance your student loans!)
Some borrowers end up paying more after a consolidation than if they had simply paid each individual loan by itself. If you have loans from the US Department of Education, call them and they can help you sort your options for free.
Law Firm / Law Suit Scams
This one starts with an unsolicited telephone call or e-mail from a law firm offering to relieve you of all your student debt, or negotiate some of your debt for forgiveness. The caller will typically request that you send a nominal fee or pay a percentage of what you owe almost immediately to the specific law firm in question, and they will then negotiate a lower payment or full relief for you.
Don’t fall for it—it’s a scam, and an expensive one. What happens is your loans may go into forbearance while they “negotiate” and then you end up going bankrupt.
Student Loan Debt Elimination Scam
The only way your entire debt can be eliminated is if you die, you are permanently disabled and cannot work, you are the victim of identity theft, or your school closed down. If none of those options are applicable to you, you are responsible for repaying your student loans.
Companies claiming to eliminate all your student loan debt are a scam. They will take your money, not repay any of your debt, and you will be stuck with a default on your loan.
If it seems too good to be true, it probably is. The only way to avoid student loan scams is to treat all unsolicited mail items, phone calls, or e-mails suspiciously. If you need help or have questions, go straight to the source and get the clarifications you need.