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Knowledge Hub / How to Avoid Common Student Loan Scams
How to Avoid Common Student Loan Scams

How to Avoid Common Student Loan Scams

Living with Student Loans
ELFI | March 27, 2024
How to Avoid Common Student Loan Scams

With so many changes to the student loan system, there’s plenty of opportunity for scammers to take advantage of the confusion. Student loan scams are increasingly common. In fact, the Federal Trade Commission (FTC) announced in March it was issuing more than $4.1 million in refunds to people who lost money in a student loan scam. 

The problem won’t end anytime soon, but by being aware of common scams and red flags to watch out for, you can protect yourself.

The Top 4 Types of Student Loan Scams

Student loan scams can come in many forms, but scammers usually use the following approaches:

1. Student Loan Forgiveness

Chances are, you’ve received a phone call lately from a telemarketer telling you about a special, limited-time opportunity to have your loans completely forgiven right away. Unfortunately, blanket student loan forgiveness measures were blocked by the Supreme Court, so this “opportunity” isn’t a real one. 

Although there are legitimate student loan forgiveness programs, they take years to qualify for, and you can apply on your own.

2. Payment Reductions

Predatory companies reach out to student loan borrowers who may be struggling to afford their payments. These companies may promise to slash your payments… in exchange for you handing over your credit card information, Federal Student Aid (FSA) ID or other personal details. 

There are ways to reduce your student loan payments, including enrolling in an income-driven repayment (IDR) plan or student loan refinancing. But there’s no cost to apply for these programs, and you can do it yourself. 

3. Student Loan Servicer Issues

Several student loan servicers ended their federal loan contracts, so millions of borrowers have new servicers. Once again, the changes are a prime opportunity for scammers who reach out to borrowers and pretend to be the loan servicer. They may tell you they need your personal information, including your bank account details, to set up your new online account. 

Once you give them that information, they can use it to take out credit cards or loans in your name. 

If your loans were switched to a new servicer, the transition happens automatically, and you’ll receive a notification in the mail about any changes. 

4. Debt Settlement Programs

Some scammers will contact borrowers, promising to settle your student loans for a fraction of what you owe. Although the idea of paying just 50% of the existing balance is appealing, legitimate debt settlement companies won’t work with federal student loans, so any company offering that option is a scam.

Student Loan Warning Signs

Some scammers are incredibly sophisticated, with professional representatives with details about you and your loans and polished websites. But these red flags can alert you to potential scams: 

Student Loan Scam FAQs

Are there legitimate student loan forgiveness programs?

There are a number of legitimate student loan forgiveness programs, including: 

What do I do if I’m the victim of a scam?

If you’re the victim of a scam, report it to state officials, the Department of Education Office of Inspector General, and the FTC

Where can I get secure help with my loans?

If you need help understanding your loan options, you can use the following reputable resources: 

How to Protect Your Information

To protect yourself, follow these tips: