Spotting and Avoiding Student Loan Forgiveness Scams

January 11, 2023

Last Updated on May 30, 2023

Have you heard about President Biden’s student loan forgiveness program? While it’s big news for borrowers, it’s also big news for criminals looking to scam people. With programs like this in the news, it makes it easier for them to prey on people that are hoping for student loan forgiveness.

Student loan scams are prevalent. This past August, the Federal Trade Commission (FTC) issued over 14,000 checks — totaling over $800,000 — to borrowers that lost money to a student loan debt-relief scheme, and that’s just the latest example.

Scammers know student loan borrowers are often desperate for help, and they use that problem to take your money or steal your personal information. You can protect yourself by learning the tell-tale signs of student loan forgiveness scams.

How to Spot Student Loan Forgiveness Scams

Student loan forgiveness scams can take many forms, ranging from companies that charge money for services you can do for free to more predatory scams that outright steal your identity. You can spot a scam by looking for the following red flags.

1. The Offer Sounds Too Good to be True

You may receive phone calls or emails that tell you about exciting loan forgiveness or payment reduction programs. While there are legitimate ways to get loan forgiveness or reduce your payments, the requirements for these programs are strict. For example:

Public Service Loan Forgiveness (PSLF): With PSLF, federal loan borrowers can qualify for loan forgiveness after working full-time for a non-profit organization or government agency for at least ten years while making 120 qualifying monthly payments.
Income-driven repayment (IDR): IDR plans are a way to reduce your monthly payment. The government uses a percentage of your discretionary income and an extended loan term to determine your new payment amount, and you have to recertify your income every year.

These programs are legitimate, but not everyone will qualify. Federal student loan forgiveness scams can be easily spotted because they promise instant loan forgiveness without any employment requirements. With student loans, nothing is that easy.

[Important: President Biden’s loan forgiveness program promised $10,000 of loan forgiveness (up to $20,000 for Pell Grant recipients) for borrowers that met income restrictions. However, that program is on hold as legal hearings are held. Any company promising it can get you loan forgiveness right now under this program is a scam.]

2. You Get a Call or Voicemail

Chances are, you’ve gotten calls from companies promising help with your loans. In some phone and voicemail student loan forgiveness scams, the caller will pose as your lender or loan servicer and tell you that you need to provide them with your account information or make a payment right away. They can be quite convincing, but student loan companies don’t cold call customers.

3. They Ask for Sensitive Information

Student loan scammers will often ask you for your [personal information, such as your Social Security number, Federal Student Aid (FSA) ID, bank account, or credit card numbers. Never give that information to anyone over the phone or via email; they can use that information to steal your identity and open loans or credit cards in your name.

4. They Ask You to Pay Upfront Fees

Some scammers will offer to handle your loan forgiveness or IDR plan applications for you if you pay an upfront fee. However, it’s completely free to apply for loan forgiveness or an IDR plan, and you can do it yourself online through the following links:

If you have other debt, such as private student loans or credit card counselors, you may pursue credit counseling from a non-profit credit counseling agency. Those services may charge nominal fees, but the federal loan programs are completely free.

5. You Feel Pressured

Scammers are effective because they convey a sense of urgency. For example, COVID-19 student loan forgiveness scams often worked because the scammers told customers they had to act immediately to have their loan payments paused or their loans forgiven. Because they made it seem like a limited-time offer, customers didn’t have time to do their due diligence and fell for the scam.

If a company uses high-pressure tactics, that’s a warning that whatever they’re selling is a scam.

6. They Ask for Power of Attorney

Some companies will ask you to sign over power of attorney so they can act on your behalf. But legitimate loan forgiveness programs and loan servicers don’t need to have power of attorney. Scammers can use the power of attorney form to change information and make harmful decisions that can hurt your finances.

7. They Claim to be Affiliated with Government Agencies

Scammers can be very polished. They may have sophisticated websites, and they often use the logos of the U.S. Department of Education or Treasury Department. However, those agencies are very careful about letting anyone use their logos. If a company is using a government agency logo, that’s another red flag.

How to Avoid Student Loan Forgiveness Scams

Now that you know about the most common student loan forgiveness scams, you can take steps to protect yourself.

Protect Your Personal Information

Never give out your personal information online or over the phone. And look out for phishing links; companies will often send out official-looking emails with links that prompt you to enter your account information or payment details. Once you do, they can steal that information and use it to open fraudulent accounts.

If you get any email or other communication, open up a separate browser to look up your loan servicer’s contact information and call them directly.

Don’t Pay Any Fees

Loan forgiveness programs, alternative payment plans, and loan consolidation are all free; you can handle the applications on your own for no cost. If a company offers to do it for you for a fee, it’s a waste of money or an outright scam.

Check with Trusted U.S. Department of Education Partners

If a company claims to be handling your student loans, you can find out if it’s true by calling the Federal Student Aid Information Center at 1-800-433-3243. You can also see the list of approved federal student loan servicers online.

If you have private student loans and aren’t sure who your loan servicer is, you can find out by checking your credit report at AnnualCreditReport.com.

What to do If You’re a Victim of a Student Loan Forgiveness Scam

If you’re already the victim of a student loan scam, don’t panic. You can take some steps now to protect your information and your money:

Notify your bank or credit card company: If you think your bank or credit card information has been compromised, contact the bank or card issuer right away. They can change your account information and issue you new cards so that thieves can’t steal your money.
Contact your loan servicer: Call your loan servicer and let them know that you’re the victim of a scam. They can set up alerts and change your login information to prevent anyone from accessing your account.
Set up fraud alerts: Contact each of the three credit reporting agencies — Equifax, Experian, and TransUnion — and set up fraud alerts. When a fraud alert is on your credit report, creditors have to take extra steps to verify your identity before issuing new loans or lines of credit. You can set up fraud alerts online:

Contact the FTC: You can submit a fraud report to the FTC online.

Legitimate Student Loan Forgiveness Programs

Although federal student loan forgiveness programs are prevalent, there are legitimate programs. Current loan forgiveness programs include:

Safe Student Loan Counseling, Forgiveness or Relief

With so many student loan forgiveness scams out there, finding reliable help can be difficult. But there are safe, reputable resources you can use to get help managing your loans. Your options include:

Non-profit credit counseling agencies: A non-profit credit counselor can help you create a budget and develop a debt repayment plan. You can find approved credit counseling agencies through the U.S. Department of Justice.
Student Loan Borrower Assistance Center: The Student Loan Borrower Assistance Center is run by the National Consumer Law Center. It has informational resources for borrowers.
Office of Federal Student Aid: Run by the U.S. Department of Education, the Office of Federal Student Aid is an essential resource for federal student loan borrowers. It has information on available repayment options, hardship plans, and loan forgiveness programs.

If you aren’t eligible for loan forgiveness programs, another option is student loan refinancing. By refinancing your federal or private student loans, you could save money or reduce your monthly payments.

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