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Struggling to pay student loans? You could be targeted by scammers

Struggling to pay student loans? You could be targeted by scammers

Student loans have burdened a generation with often insurmountable debt. These debts make it difficult for student-loan borrowers to afford the cost of living in many cities, qualify for a mortgage or even start a family. The last thing student-loan borrowers need is scammers making the debt burden worse. To avoid becoming a victim, understand the types of scams and watch out for red flags.

Types of student loan scams

It’s important to understand that applying for a loan modification, such as an income-based repayment plan, can be done for free by visiting studentloans.gov. Borrowers can also apply for deferments, forbearances and loan forgiveness by following the instructions posted on the website.

Advanced fee scam

Perpetrators claim they can get you the “best” interest rates if you pay an upfront fee of 1% to 5% of the loan amount. No legitimate student loan relief program requires upfront fees.

Loan consolidation scam

After graduation, many borrowers want to consolidate their federal student loans to lock in a low, permanent interest rate and have one payment versus several. Eligibility is automatic and registration can be completed for free at studentloans.gov. Some scammers claim they handle consolidations, charge a fee and then do nothing.

Loan forgiveness scam

Student loans are difficult to eliminate. They are not even eligible for discharge in bankruptcy. They can be forgiven under certain conditions, including the following:

  • Permanent disability.
  • School closure.
  • Identity theft.
  • Completion of an income-based repayment plan.
  • Forgiveness through a public service program.

None of these legitimate programs for student loan forgiveness requires a company to complete the request for you or charges any fees. Those who qualify can simply complete the proper forms available at studentloans.gov.

Red flags

Scammers are always inventing new tricks, so it’s important to know the five red flags that indicate a student-loan scam.

– Charging an advanced or monthly fee. No legitimate program requires an advanced or monthly fee to provide help with student loan repayment, modification or forgiveness.

-Promising immediate loan forgiveness. Legitimate loan forgiveness programs require years of public service, the completion of a 20- to 25-year income-based repayment plan or a total disability.

-High-pressure sales tactics. Many scams rely on pressuring targets by claiming a fee must be paid right away before a special student-loan relief program ends. This is never the case.

– Personal information requested. Scammers often push to get Social Security or FAFSA numbers. They can then use these to access your accounts. Never give them out to a company unless you know it is legitimate.

– Social media or Google ads. Often, misleading ads on the internet promise help for student-loan borrowers in need. Many of these are placed in an attempt to collect a fee for services that are otherwise free through studentloans.gov.

Unfortunately, many fraudsters attempt to take advantage of distressed or insolvent borrowers. They play on fear and promise to help, but they simply want to charge fees, making the student debt crisis worse. Programs that help student loan borrowers, such as loan consolidations, income-based repayment plans and loan-forgiveness programs all cost nothing. Those who qualify can simply complete the necessary forms at studentloans.gov. To avoid these scams, be sure to understand your legitimate repayment options and watch out for the five red flags.

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Bill Airy

About the Author:

Bill Airy is the CEO and Founder of BoostMyScore. For over 12 years he has helped American consumers get a second chance at a better financial life by helping them to improve their credit score. He regularly publishes helpful content on this Blog to educate others about Credit Scores and best practices when trying to improve them.

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