Beware of These Student Loan Forgiveness and Repayment Scams

September 12, 2019
Video Source: Federal Trade Commission
Chris JacksonBy Chris Jackson
Assistant Vice President of Retail Services

The cost of a college education is daunting enough., but if you’re one of the 45 million Americans trying to pay off your college loans, you could also be a target for student loan scams disguised as “loan forgiveness programs.”

“Recently, there has been an increase of Internet ads promoting student loan forgiveness or a dramatic reduction in student loan rates or payments,” says Steve McCullough, president and CEO of Iowa Student Loan. “Frankly, we have to remind individuals that if it sounds too good to be true, it probably is. However, legitimate options are available, and it is important that students and families know where to find reliable information.”

The most important thing to remember is this: When it comes to your student loans, there is absolutely nothing that a so-called “student debt relief company” can do for you that you can’t do yourself for free. In this article, we’ll break down how to detect and avoid student loan scam calls and other student loan forgiveness scams:

Examples of Student Loan Scams

The U.S. Department of Education recently highlighted some examples of false claims that accompany many student loan scams:

  • “Act immediately to qualify for student loan forgiveness before the program is discontinued.”
  • “You are now eligible to receive benefits from a recent law that has passed regarding federal student loans, including total forgiveness in some circumstances. Federal student loan programs may change. Please call within 30 days of receiving this notice.”
  • “Your student loans may qualify for complete discharge. Enrollments are first come, first served.”
  • “Student alerts: Your student loan is flagged for forgiveness pending verification. Call now!”

These warning signs, in particular, are red flags for potential student loan forgiveness scams:

  • Direct solicitations: It’s best to ignore student loan forgiveness offers received out of the blue through email, snail mail, by text message or by phone.
  • Advance payment: Do not trust any company that requires an advance payment for loan forgiveness services.
  • Guarantees: If an offer includes a guarantee that your loan will be forgiven, especially if it offers immediate forgiveness, it is likely a scam.
  • Claims to act immediately: Often times, student loan scams create a false sense of urgency by citing “new laws” or programs that will be ending soon.
  • Requests for your FSA ID: You should never give out your federal student aid ID or allow a company to create one on your behalf. Your FSA ID has the same legal status as a written signature, so anyone with your ID information could make changes to your account without your permission.

Are All Student Loan Forgiveness Calls a Scam?

In a short answer, yes. Many unethical companies will use a student loan relief helpline to manipulate individuals struggling with their loans. They will make offers and charge fees to enroll you in federal programs that were free in the first place. When it comes to your federal student loans, you should never need to pay a third-party company to receive assistance.

While there is certainly a difference between an illegal scam and simply paying for something you don’t need, many so-called “debt relief” agencies additionally mislead people by wrongly claiming to work with the Department of Education, falsely promising to forgive loans and violating telemarketing and communications laws.

To combat these student loan scams, the Federal Trade Commission has even launched a nationwide initiative called “Operation Game of Loans” to file criminal complaints against companies who break the law. Sadly, people still fall victim to these student loan scam calls every day.

How to Avoid Student Loan Scams

  • Never pay a fee up front for help that you could otherwise get for free.
  • Don’t share your Federal Student Aid ID with anyone.
  • Don’t respond to out-of-the-blue solicitations for student debt relief.
  • Register for free with the National Do Not Call Registry, which was created by the FTC to block unwanted sales calls to your phone. To register, go to donotcall.gov or call 1-888-382-1222 from the phone you want to register. (If you continue to get unwanted calls, odds are they are from scammers and spammers).

Where Can I Get Real Help With My Student Loans?

  • For free assistance with federal student loans, visit StudentAid.gov/repay.
  • For help with private loans, contact your loan company directly. You can find the company's contact information on your original credit agreement or promissory note (these are documents you should always keep); or you can contact your college’s financial aid office to help you track down this data.

How to Report Student Loan Scams

If you believe you have witnessed an attempted student loan forgiveness scam, you should file a complaint with the Federal Trade Commission and report the scam to your state attorney general. Meanwhile, if you believe you have fallen victim to a student loan scam:

  • Contact your bank or credit card company immediately to stop payments on the charges.
  • Monitor your financial accounts closely and report any suspicious activity to your bank.
  • If you gave out your FSA ID, contact the Federal Student Aid Information Center at 1-800-433-3243 and report that your ID has been misused.

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About the Author

Chris Jackson

Chris Jackson is the Assistant Vice President of Retail Services, responsible for management oversight of Security National Bank's retail division in Sioux City. A graduate of Briar Cliff University and the IBA Commercial Lending School, Chris has more than a decade of financial experience as a personal banker and commercial lending officer.