Tags: student | loan | scam

3 Ways to Spot a Student-Loan Scam

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Tuesday, 29 January 2019 09:27 AM Current | Bio | Archive

As student loan debt grows, student loan scams have become more common.

Borrowers have reported receiving numerous calls, letters, emails and texts from so-called debt relief companies that claim to help students with their loans.

Often, these companies require a fee, take your personal information, and then either never contact you again or help you complete a process you could have done on your own for free.

In some of the most common scams, student loan companies promise to consolidate your loans for lower monthly payments, or student loan debt relief companies claim to offer student loan forgiveness for a fee. But you can consolidate and apply for student loan forgiveness for free, so you shouldn't have to pay a company to do it for you.

Here are three of the best ways to avoid being scammed by these companies.

Red Flag #1: You are required to pay upfront or monthly fees.

If a company contacts you and promises to help you with student loans in exchange for a fee, whether an upfront lump sum or a monthly payment, it's a red flag. Always avoid paying an upfront fee because the company could take it and never contact you again. If you do hire a third-party service for student loan help, only make a payment once the company has completed part or all of the process.

Solution: Before getting help from a third-party service, use all the free resources available to you. Contact your loan servicer if you need help changing your student loan repayment plan, consolidating your loans or applying for student loan forgiveness. There are many free guides, calculators and articles available as well to help you figure out the best way to handle your student loans.

Red Flag #2: You are asked to give your student loan account information.

Never give your student loan account password to anyone. If you give anyone access to your Federal Student Aid (FSA) ID information, they will be able to make changes to your account without your permission. The federal education department and its partners will never ask you for your FSA password. And only give other student loan account information if you're sure you're speaking with your lender or servicer. Usually, it's best if you contact the company, not the other way around.

Solution: A company that contacts you and claims to be your lender, the Department of Education or your student loan servicer should already have your information. If you get a call from someone claiming to represent these agencies, tell the person you'll call back and don't give out any account information. Then use the legitimate phone number or email address you typically use to contact that entity. It's best if you initiate the communication if you need to discuss your account.

Red Flag #3: You are asked to sign a third-party authorization form.

Another way these debt relief companies access your account and personal information is by asking you to sign a third-party authorization form or power of attorney. This gives them permission to talk directly with your student loan servicer and make changes to your account on your behalf. By signing this form, you allow them to change your account and contact information without asking for your permission, which can potentially damage your student loan payment information or hurt your credit score.

Solution: Avoid signing any authorization documents from debt relief companies. If you need help with your account, contact your student loan servicer and use the free resources on the government website. If you need additional help, contact a financial adviser and ask for help managing your finances.

Before using a third-party service or giving out your information, contact your student loan servicer about the process you need to complete, as you may be able to do it for free. If you've fallen victim to a student loan scam, take action immediately. Depending on the information you gave out, change your account password and file a complaint with your student loan servicer, bank and credit bureaus.

Joe Resendiz is a Research Analyst at ValuePenguin, where he focuses on personal finance and credit research to assist consumers. Previously, Joe specialized on public sector and infrastructure financing at Goldman Sachs. He graduated from the University of Texas at Austin with a BBA in Finance.

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As student loan debt grows, student loan scams have become more common.
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2019-27-29
Tuesday, 29 January 2019 09:27 AM
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