Looking for student loans can be a trying process. When you’re under that kind of stress, it’s easy to fall prey to student loan scams. Scammers work by offering you a tempting easy solution to your problem. Unfortunately, instead of resolving anything, it just throws you further into debt.
Knowing how to protect yourself from new student loan scams is vital. These tips will help you spot the red flags.
Never Respond To Unsolicited Queries or Offers
While you are researching loans, you may receive several unsolicited phone calls or emails offering to loan you money. Regardless of what the email or phone call promises, just ignore them. Don’t get lured into responding to find out more. Any unknown company that contacts you out of the blue is almost certainly looking to scam you.
Legitimate loan companies rarely reach out to students. Instead, they work on building their online presence and establishing a solid, trustworthy reputation. This way, students who need loans feel confident about approaching them and not the other way around.
Received any unsolicited email or phone call from a loan company promising to help you? The best thing you can do for your own protection is to ignore them. Use your time instead to research legitimate loan companies.
Never Share Sensitive Personal Information
Another common ploy that scammers use is asking for your personal details. They may ask for your Social Security Number, Federal Student Aid ID, credit card details, or bank details. They claim they need these details to help facilitate your loan application or to negotiate a good deal for you. It’s easy to fall for this scam. After all, every student wants to get the best loan deal.
So why exactly do scammers ask for these details? This is a hallmark sign of identity theft. Once somebody has your personal information, they can use these details for various criminal activities. You may find huge purchases on your credit card. Your Social Security number can be used to apply for a FSA ID. Your bank details may be used to carry out illegal transactions or even withdraw your balance. Some scammers may use your bank details to lock you out of your account. You then have to pay them to get it unlocked.
While legitimate student loan lenders may require some of this personal information, they won’t ask for it outright. That comes later in the application process.
Never Pay Any Upfront Fees
You’re desperately searching for cheap student loans and you receive a call or email promising to get you a “great” loan deal. They guarantee fast approval, low interest rates, flexible repayments, and maybe even forgiveness. The only condition is that you need to pay them some amount as upfront fees to cover their costs. This is an outright scam—there’s no two ways about it. This is just the scammers’ way of profiting by playing on your desperation.
No legitimate lender will ask you for upfront fees to just to look for a loan. What you may have to pay the lender is an administration or origination fee, but that’s only AFTER your loan application is approved, never upfront.
Never Sign a Power Of Attorney Agreement
People sign Power Of Attorney Agreements to authorize somebody else to take action on their behalf. Many scammers use this angle to cheat students looking for loans. They ask you to sign a power of attorney that allows them to negotiate a loan on your behalf. Getting somebody else to do all the paperwork sounds so good. It saves you all that time and hassle. Unfortunately, this is just another way to separate you from your money.
A power of attorney is a powerful document. You are in effect trusting them with your finances. It’s all too easy for that person to misuse the power of attorney to benefit them and not you. Never give anybody else blanket authority over your finances. Be even more careful when giving power of authority to somebody you don’t know.
Be Wary of Online Ads
The online world makes it easier than ever for scammers to find their next victim. All they need to do is buy ads that show up on relevant sites. You’ll see these ads when you’re scrolling through social media or even when scrolling through your emails. The worst part is these ads are persistent. They keep showing up nonstop till you give in and click to find out more. Once you do that, it gets even harder to resist and you’re more likely to fall prey to that scam.
Only trust ads from well-known, reputable sources such as Sallie Mae, LendKey, Credible, or Laurel Road.
Never Deal With a Lender That Doesn’t Have a Strong Online Presence
All legitimate lenders have professional websites. They will have their address and contact details clearly mentioned. This makes it easier for prospective borrowers to get in touch with them for any clarifications. They also have all loan details and terms and conditions mentioned on their website.
When looking for new student loans, only check out sites that have an established online presence. Call them if you have any questions and see how they deal with you. Is their customer service friendly and helpful? Did they clarify your doubts or give rise to a few more?
Avoiding Student Loan Scams
Listen to your gut. If you feel something isn’t right, scratch them off your list and check out other lenders. There are several reputable lenders. Take your time and only deal with one that ticks all your boxes and that you’re comfortable with.
Falling for a scam can be the start of an ongoing financial nightmare. Take some time to learn how to recognize student loans and how to protect yourself against them. It will save you from a lot of heartache and is time well spent.