How to Avoid Student Loan Forgiveness Scams

By Elaine Rubin November 10, 2021

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On Oct. 6, 2021, the U.S. Department of Education (ED) announced a time-limited waiver opportunity to its PSLF program rules. Under the time- limited waiver opportunity, borrowers could receive credit for past payments which would not have been previously classified as qualifying payments or instances in which payments were not made, specifically, servicemembers who were advised to put their loans in a deferment or forbearance status and did not make payments while on active duty.  The months the borrower spent on active duty can be counted toward the PSLF.

Borrowers will need to submit a PSLF form—the single application used for a review of employment certification, payment counts, and processing of forgiveness—on or before October 31, 2022 to have previously ineligible payments counted.

The time- limited waiver essentially waives all requirements except the employment requirement. If you have Federal Family Education Loans (FFEL) or Perkins loans, you will still be required to consolidate your loan with a Direct Consolidation Loan by Oct. 31, 2022. However, any payments made on your federal student loans, under any repayment plan (partial, full, or late), on any FFEL, Perkins, or Direct Loan, will count towards your 120 qualifying payments.

Under the new time-limited waiver, you need to have been employed or are currently employed by an eligible employer (government, 501(c)(3) not-for-profit, or other not-for-profit organization which qualifies), and working full-time. You can still qualify for the full-time requirement if you are working multiple part-time jobs (that totals at least 30 hours per week) with eligible employers. For more information on which employers meet PSLF Program requirements visit the PSLF Help Tool.

Student loan debt has been a hot topic recently. With the rising cost of higher education, more and more students and parents have had no other choice but to borrow money to cover the costs of tuition.  According to educationdata.org, the average cost of tuition and other related expenses to attend a public in-state college for 4-years can run over $100,000, with costs increasing for out-of-state and private schools.

For a large majority of students, these costs are offset with student loans. The average borrower owes around $30,000 in student loan debt, with half of all borrowers owing $20,000 or more, 20 years after entering school, according to educationdata.org.

Most students are aware of scholarships and grants as resources to help defray the costs of education while in school, and many do take advantage of these to reduce the amount of money borrowed. Even still, dependent upon the course of study and school attended, loans may still be an important piece of the college education plan.

With federal student loans and many private student loans offering a deferment while in school, allowing students to focus on their education, the existence of loans take a back seat. These loans typically have the first payment set to be due 6 months post-graduation. This gives students an additional cushion to find a to help make their monthly payments. This 6-month grace period can create a situation where a student will not pay too much mind to the debt being acquired, until it’s time to make that first payment.

After graduation, with newly minted degree in hand, the realities of student loan debt set in and many students scramble for solutions. If this is you, you may be seeking a forgiveness program (a program that will cancel or pay your student loan debt for you). While just by virtue of having a loan forgiven seeming too good to be true, but there are in fact legitimate student loan forgiveness programs. However, there are even more out there looking to scam naïve and ill-informed students.

Don’t worry. We have all the red flags you need to be aware of when seeking out a loan forgiveness program and some tips, if you unfortunately discover that you are a victim.

Red Flags of a Student Loan Forgiveness Scam

You get a call or text form your “lender” claiming you qualify for Biden student loan forgiveness or New student loan Grant Forgiveness or some other loan forgiveness program.
 If you received a call or text from someone claiming to be your lender, even if they know the right name of your lender or student loan servicer as well as other specific information, do not respond.

Reach out directly to your lender to inquire if they have questions or business you need to take care of with them. DO NOT use the number provided in the call or text. Make sure you get their number from a trusted source or from your loan account portal.  Never trust just anyone that calls or texts.

More>>> Financial Aid Contacts and Student Loan Help

You are being asked to pay an upfront fee

It should raise a red flag if you are asked to pay a fee to receive forgiveness on money you owe. If you have federal student loans, there is no fee or charge to apply for a legitimate student loan forgiveness program (like, Public Service Loan Forgiveness). You can always contact your lender or servicer directly, or even the U.S. Department of Education to help you complete the necessary forms.

When it comes to private student loans, there are no blanket forgiveness programs that exist. If you only have private student loans and you are being told you could qualify for forgiveness, that should be a major red flag. Contact your lender yourself if you have any questions about potential forgiveness options.

There are some third-party companies can try to claim to be an intermediary for you but know that what they are charging you for is something that is free to you. If you are opting to use a service to help you complete paperwork, do not provide them with any private information, like your FSA ID or password, social security number, or bank account information. You can always contact your loan servicer for assistance, many servicers will offer to help you complete paperwork for free.

You are being promised quick results

Nothing is fast, especially loan forgiveness. Typically, student loan forgiveness programs require some sort of service in exchange for money given toward your loan. It’s not uncommon for programs to require years of service/work in advance of any monies paid toward your student loan. You are required to continue paying on your loan while completing this service. The idea of having a loan forgiveness program fulfilled in short amount is extremely rare, if not impossible.  So, if you find a company promising debt forgiveness quickly, avoid them.

Another common tactic which isn’t about student loan forgiveness, it’s a claim to lower your monthly payment to $0. There are some legitimate federal student loan repayment plans known as income-driven repayment plans that could have a payment as low as $0 per month  for eligible borrowers. However, the determination of your payment is based on your discretionary income (10-20% depending on your repayment plan), your income (and your spouse depending on your repayment plan and how you file your taxes),the state you live in, and family size. These third-party debt scam companies often times will promise you a $0 payment and will commit fraud on your account to qualify you. There have been cases where a borrower’s family size is increased to qualify them for a lower monthly payment, and servicers are now flagging these account changes. While they are aware of some other flags of known debt relief scam companies, you will be asked about the changes to your account.

The company claims to be affiliated with the federal government

Some scammers that try to charge you fees and tell you they can take care of your loans in short order, sometimes they will also try to claim to be affiliated with the federal government to give a sense of legitimacy to their scam. They might even try to facilitate the completion of applications and forms for you, that you could do yourself.  Be wary of these people and definitely don’t hand over any money or personal information.If a company is indicated that they are affiliated with the federal government, you want to report them to the Federal Trade Commission. When you submit a fraud complaint make sure to provide as much information as possible, like the phone number that called or texted you.

The company is asking for personal information or power of attorney

Some scammers will try to convince you to give them your personal information or even power of attorney, as they claim to “take care of” the forgiveness process for you. Never give your personal information (social security number, bank account number or FSA ID) to a company offering to seek student loan forgiveness for you. Not only will they take your money (their services are rarely free, and if you share your bank account information the consequences could be worse than just fees) but even if they are, they can use your personal information and steal or sell your identity.

You are being pressured to act

Urgency is a favorite tool scammers’ like to use to get someone to act without fully thinking through a situation. They will apply pressure to get you to turn over your money and personal information before you have a chance to realize they are not working in your best interests. Always avoid companies pressuring you to act. You can always call your loan servicer and discuss deadlines with them.

What to Do if you are scammed

See if you can retract payment

Chances are you will not recover any upfront fees paid to scammers. However, if you were able to pay with a credit card or some other form of payment where you can cancel the payment, there’s a chance you can recover your money. However, in most cases scammers are smart enough to ask for other forms of payment they know you will never be able to recover.

Freeze your credit

If you’ve given your social security number to someone to help with loan forgiveness. Your identity, credit score and credit report are at risk. Freeze your credit immediately with the 3 main credit reporting agencies (TransUnion, Equifax and Experian) and report the incident to the government at Identitytheft.gov.

Reset your FSA ID

Most students have federal student loans and it’s possible the scammer asked you for your FSA ID (Federal Student Aid ID). If this is the case, reset the password on this account immediately before anyone has a chance to go in and claim any more of your personal information.

Submit a complaint to CFPB and FTC

In addition to reporting the possible identity theft, you will also want to submit a complaint to the Consumer Finance Protection Board and Federal Trade Commission. It’s important to document the scam in as many places as possible, including your State Attorney General. Not only will it help you verify you are a victim, these actions will alert the authorities and could potentially prevent others from being scammed.

Contact Your Loan Servicer

This is an important step. Depending on the access you gave the debt forgiveness scam organization, they may have been able to change information in your student loan account, including your contact information. You need to fix this so your servicer can work with you and not the scammer with your account.

Legitimate Student Loan Forgiveness Programs

Don’t be disheartened by the scammers, there are legitimate student loan forgiveness programs out there for you to take advantage of. Many of these are facilitated by the U.S. government and are for federal student loans only, but there are some for those holding private student loans as well.

Public Service Loan Forgiveness (PSLF)

Public Service Loan Forgiveness is a government program for those who work 10 years within the government, military, or eligible non-profit entity. After making 120 qualifying payments in an eligible repayment plan, while working at a qualified employer, the U.S. Department of Education will forgive the remaining balance on your eligible Direct Loans. your Federal Direct Loan.

There have been some significant waivers granted to this program on a temporary basis.

More>>>Public Service Loan Forgiveness

Teacher Student Loan Forgiveness 

Another government backed program, Teacher Student Loan Forgiveness, will forgive your student loan up to $17,500 dependent on the subject you teach and where you teach.

More>>>Teacher Loan Forgiveness

Nurse Student Loan Forgiveness

For nurses who serve in hospitals with a critical nursing shortage there are a number of programs to help repay part of your student loans. For students with private student loans the Nurse Corp Repayment program will pay up to 85% of a loan when certain criteria are met (such as working 2 or more years in a critical shortage facility or qualified nursing school).

More>>>Student Loan Forgiveness for Nurses

Other Loan Forgiveness Programs

In additional to these, there may be loan forgiveness and repayment assistance programs that aren’t part of the federal student aid program. However, to identity other legitimate programs will require you to complete some research. You may even qualify for assistance through your employer.

More>>> Employer Assistance

Student Loan Refinance

If after an exhaustive search you are unable to find a student loan forgiveness program you qualify for, don’t despair, there are still options.  If you have federal loans you can reach out to your student loan servicer and modify your repayment plan or even consolidate your loans. Another option is to refinance your student loans to either save money (if you qualify for a lower interest rate) or change the terms to lower the student loan payment and make it more manageable. Please keep in mind if you refinance your federal student loans with a private lender, you will lose benefits reserved only for federal student loan borrowers.

Don’t fall for a student loan forgiveness scam. There are programs that are legit but there are also people willing to take advantage of desperate borrowers. If you are stuck, talk to your lender or student loan servicer and see if you can work out something that agrees with both of you and if not, a loan refinance might be the solution.

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¹Fixed rates range from 2.49% APR to 6.94% APR with a 0.25% autopay discount. Variable rates from 1.74% APR to 6.59% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.

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• Variable rate range: 2.94% – 4.84% APR¹
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College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

¹The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.

²This informational repayment example uses typical loan terms for a refi borrower who selects the Full Principal & Interest Repayment Option with a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

³$5,000 is the minimum requirement to refinance. The maximum loan amount is $250,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.

Information advertised valid as of 11/10/2021. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.

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Variable: 1.99% APR - 5.74% APR²

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10-yr/20-yr repayment term based on creditworthiness

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Discover Private Consolidation Loan

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¹Visit DiscoverStudentLoans.com/AutoDebitReward for terms and conditions.

²Lowest APRs are available for the most creditworthy applicants who are approved and choose a shorter repayment term, and include Auto Debit Reward.

³The fixed interest rate is set at the time of application and does not change during the life of the loan unless you are no longer eligible for one or more discounts. The variable interest rate is calculated based on the 3-Month CME Term SOFR index plus the applicable margin percentage less any applicable discounts. The 3- Month CME Term SOFR index value for variable interest rate loans is 0.125% as of November 14, 2021. 3-Month CME Term SOFR is administered by CME Group and is published by CME Group on its website (cmegroup.com/termsofr). Discover Student Loans may adjust the variable interest rate quarterly on each January 1, April 1, July 1 and October 1 (each an “interest rate change date”), based on the 3-Month CME Term SOFR rate available for the day that is 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125), or 0%, whichever is greater. This may cause the monthly payments to increase, the number of payments to increase or both. If the 3-Month CME Term SOFR rate is less than zero percent, then the index will be deemed to be zero percent (as stated in the promissory note) for purposes of calculating your interest rate. Your variable interest rate (index + margin – applicable discounts) will not exceed 18%. Our lowest APRs are only available to applicants with the best credit. The APR will be determined after an application is submitted. It will be based on credit history, the selected repayment option and other factors, including a cosigner’s credit history (if applicable). If a student does not have an established credit history, the student may find it difficult to qualify for a private student loan on their own or receive the lowest advertised rate. Learn more about Discover Student Loans interest rates.

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¹Rates and offers current as of April 1, 2021. Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.99% APR to 5.15% APR and Variable Rates range from 2.15% APR to 4.45% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%.

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¹Interest Rates

Fixed interest rates range from 2.30% APR (with auto debit discount) to 5.96% APR (without auto debit discount). Your interest rate will depend on your (and if applicable, your cosigner’s) credit qualifications. The fixed interest rate will remain the same for the life of the loan.

Variable interest rates range from 1.87% APR (with auto debit discount) to 5.33% APR (without auto debit discount). Your interest rate will depend on your (and if applicable, your cosigner’s) credit qualifications. Variable rates may increase after consummation. The variable interest rate is equal to the One-Month London Interbank Offered Rate (“One-Month LIBOR”) plus a margin. The One-Month LIBOR in effect for each monthly period (from the first day of the month through and including the last day of the same month) will be the highest One-Month LIBOR published in The Wall Street Journal “Money Rates” table on the twenty-fifth (25th) day (or if such day is not a business day, the next business day thereafter) of the month immediately preceding such calendar month. The Annual Percentage Rate (APR) for a variable interest rate loan will change monthly on the first day of each month if the One-Month LIBOR index changes. This may result in higher monthly payments. The current One-Month LIBOR index is 0.09% as of December 1, 2021.

Auto Debit Interest rate reduction of .25% for automatically withdrawn payments from any designated bank account (“auto debit discount”). Auto debit discount applies when full payments (including both principal and interest) are automatically drafted from a bank account. The auto debit discount will continue to apply during periods of approved forbearance or deferment if the auto debit discount was in effect at the time of receiving the forbearance or deferment. Auto debit discount will remain on the account unless (1) the automatic deduction of payments is canceled or (2) there are three consecutive automatic deductions returned for insufficient funds at any time during the term of the loan.

The lowest rate for each loan type requires automatically withdrawn (“auto debit”) payment. The lowest rate is available only to the most creditworthy applicants. Not all borrowers will receive the lowest rate. The interest rate and Annual Percentage Rate (APR) may be higher depending upon (1) the credit history of the borrower and, if applicable, the cosigner, (2) the repayment option and loan term selected, (3) the loan type selected, and (4) the highest level of education attained. If approved, applicants will be notified of the rate qualified for within the stated range.

²Cosigner Release. A request for the cosigner to be released can be made by either the borrower or cosigner when each of the following conditions has been met:

• The account must have been in full principal and interest repayment for at least 24 months.
• Twenty-four consecutive, on-time principal and interest payments, or lump sum equivalent, must have been made. NOTE: A lump sum payment does not replace the requirement to have been in full principal and interest repayment for at least 24 months. Interest-only or fixed-pay payments while enrolled in school do not qualify towards the 24 consecutive on-time payments.
• The loan must be current at the time of request.
• The loan must not have been in deferment, hardship forbearance, or other alternative payment assistance plan within the past 24 months.
• The loan must not have been permanently modified from its original terms in the credit agreement.
• The primary borrower must be a U.S. citizen or have permanent residency in the United States.
• The primary borrower must meet the age of majority requirement in their permanent state of residency.

Requirements are subject to change. If all of these conditions have been met, then an application for cosigner release may be submitted. The primary borrower is required to demonstrate they have the ability to assume sole responsibility for the loan(s) by providing proof of income, meeting debt-to-income requirements, and having a satisfactory credit history. (A credit report will be obtained during the review process).

³Refinance Loan Eligibility: You must be a U.S. citizen or permanent resident alien with a valid U.S. Social Security number, and be the legal age to enter into binding contracts in your state/territory of residency, or be at least 17 years of age and apply with a cosigner who is at least the age of majority in their state/territory. Non-residents can apply with an eligible cosigner who is a U.S. citizen or permanent resident alien with a valid U.S. Social Security number. The student loans you refinance must be in their grace or repayment period, and you can no longer be enrolled in school on a half-time or more basis. You must have at least $5,000 in student loans to refinance. You, or your eligible cosigner, must have an annual income of at least $36,000. Approval subject to credit review. Other credit criteria may apply.

Refinance Loan Limits:

Minimum loan amount: $5,000

Maximum student loan limits:

$125,000 for borrowers with an undergraduate degree.

$175,000 for borrowers with a graduate, MBA, or law degree.

$500,000 for borrowers with a graduate health professional degree.

Nelnet Bank, and any associated logos or design marks, are trademarks or service marks of Nelnet, Inc. All loan programs and terms are subject to change or may be discontinued at any time without notice. Certain restrictions and limitations may apply.