Rising college costs are a major worry for many families, leading more students and parents to rely on loans to pay for tuition. Attending a public in-state college for four years can exceed $100,000, and the expenses are even higher for out-of-state and private institutions.
Most students rely on loans to make these costs more manageable. On average, borrowers owe about $30,000 in student loans, and nearly half still owe $20,000 or more even 20 years after starting college according to educationdata.org.
Read more to understand President Biden's student loan forgiveness and repayment relief.
Most students are aware of scholarships and grants as resources to help defray the costs of education while in school. Many do take advantage of these to reduce the amount of money borrowed. However, loans may still be an important part of the college education plan, depending on the course of study and school attended.
With federal student loans and private student loans offering a deferment while in school, allowing students to focus on their education, the existence of loans takes a back seat. These loans typically have the first payment due six months post-graduation, providing students with an additional cushion to find a way to make their monthly payments. However, this grace period can create a situation where a student overlooks the debt being acquired until it's time to make that first payment.
After graduation, with a 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. Although the idea of having your loan forgiven may seem too good to be true, there are legitimate student loan forgiveness programs available. However, there are also many scams targeting naïve and ill-informed students.
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 or student loan discharge programs (like, Public Service Loan Forgiveness or Total and Permanent Disability Discharge). 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 or the U.S. Department of Education's Office of Federal Student Aid 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 federal student loan servicers are aware of some of the known flags of debt relief scam companies, you will be the one 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. You can try to call your bank or credit card company to discuss the situation and see if they are able to stop payment or if they offer any other protections against scammers. You may want your bank to change all your account numbers to help future use of the account by scammer.
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 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 regarding 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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