It is no secret that student debt is a common problem. Unfortunately, an even bigger problem occurs when students in debt fall victim to scammers. A recent student loan study by Experian revealed that since 2008, student debt in the U.S. had increased by a whopping 129%. This rise in debt creates more opportunities for scammers to trick these students, usually by promising them relief of their debt in return for a fee. It is important to look out for signs of illegitimate loan companies or scammers, and you can do this by familiarizing yourself with this handy guide:
Types Of Student Loan Scams
There are multiple ways to scam students, however most student debt scams fall under three main categories: consolidation scams, debt-forgiveness/relief scams, and tax scams.
Consolidation Company Scams
These are scammers that act as student loan companies, and usually try to offer consolidation (to possibly lower your fees). They request some sort of payment in return, but the important thing to remember here is:
- There is no fee for consolidation. You can do this for free at studentloans.gov.
- Consolidation does not lower your fee, but combines (consolidates) multiple loans into one, making it a simpler payment process.
- Only the federal government can offer consolidation; any other company that offers this service is guaranteed to be a scam.
Debt-Relief Scam
Some scammers offer to relieve you of your student loan debt in return for a fee. This is not possible, because no student loan companies will forgive you for your debt (otherwise, they wouldn’t be able to make any money!). To distinguish between a scammer and a legitimate loan company, you need to remember that:
- The ONLY kind of debt relief available is a legitimate federal government program called Public Service Loan Forgiveness, which is only granted to federal public servants in need of a loan
- Some scammers might claim that student loan relief is possible via a law firm. Law firms legitimately cannot offer student loan relief.
Federal Student Tax Scam
A common scam is one that demands you pay your federal student tax, or some sort of consequence will follow should you not meet these demands. There are several reasons that make this scam implausible:
- There is no federal student tax
- IRS will never demand immediate payment
- IRS will always contact you first via email before calling you
How To Spot Student Loan Scams
It’s not always easy to spot scammers, so awareness is essential to avoiding them. In our modern society, technology is so advanced that scammers can even access private information of yours (such as your student loan balance) to seem legitimate. These are common methods that scammers use to lure their victims in:
- Aggressive Advertising:
This is when scammers send excessive emails, calls or messages that demand immediate payment. They are usually characterized by warnings (should you not make your payment to them), or by congratulating the student for gaining an opportunity to be relieved of debt. For example, a message may look like this: “Call now for potential student loan cancellation” or “Congratulations, you are eligible for complete loan relief”. The urgency is often conveyed through giving you limited time to pay (or to claim, depending on what the message is about). A message may end off with something like “Offer expires within 30 days,” or “Call now while offer is limited”.
- Official/Legitimate-Sounding Names:
Some false companies have secure looking websites, contacts and email addresses that seem plausible. Do not be fooled by appearances, as it is easy for anyone to create fake profiles and/or business websites using online web creation tools. For example, you could get an email with a professional looking letterhead and logo sent by a realistic company name such as “Student Aid Company” or “Loan Relief Services”. When you are faced with something like this, take the time to research the company and see if it has a proper online presence or some sort of reference that you can contact.
- Affiliation:
To seem even more official, a lot of these scammers will claim an affiliation or relationship with U.S. Education department or with the federal government to sound more legitimate. These are purely governmental services that do not work with other companies to provide loan relief services.
- Promise of Immediate Cancellation
Loan companies will never forgive a student loan. Scammers often want to lure victims in by claiming that immediate forgiveness or relief of debt will occur for a fee in return. The urgency is a big warning sign, and remember that no company wants to lose money by giving up on a potential loan-payer.
Are You Faced With A Scammer?
If you think you have a scammer on your hands, you should do the following:
- Do Not Contact Them
Its best to try an avoid opening emails from scammers in the first place, which isn’t always easy to do if the information header does not provide obvious signs of a scam. Always be cautious when opening unknown emails.
- Research Their Company Thoroughly
Find out more about them. You may find that the company trying to scam you is already in an online article for scamming someone else!
- Contact Your Federal Student
Loan Company
Familiarize yourself with the laws and rules regarding loans. The more you learn about the process, the more informed you will be when it comes to spotting scammers!
Remember, awareness is key; you must keep your wits about you to avoid being sucked in. Keep up to date with all things fraud and scam related at antifraud news.