Unfortunately, when any program starts where there is a large quantity of money flowing, scam artists tend to emerge. We see this every year around tax time, we saw it when stimulus checks were being distributed during the COVID-19 pandemic, and we're starting to see it already with student loan payments restarting.
With that in mind, here are some of the most common types of student loan scams to watch out for and what to be on the lookout for as repayment begins.
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Fake assistance or cancellation programs
One form of this is companies that claim they'll get your student loans forgiven or discharged, often through "exclusive" or "limited time" programs. There are no legitimate student loan forgiveness programs that aren't operated by the Department of Education or by private employers for their workers as an employee benefit. You can see all of the legitimate ways to qualify for federal loan forgiveness on the Department of Education's website.
Fake Department of Education websites
This is also a common tax scam. While IRS.gov is the official website of the IRS, you'll see scammers sending emails directing you to other official sounding websites like IRSgov.com or other variations. These are 100% fake and are generally designed to either steal your personal information or to trick you into sending money to scammers.
The official Federal Student Aid website is studentaid.gov, and the Department of Education's website is ed.gov. If you're directed to a website that ends in .com, .net, or any other extension, it isn't legit. The same goes for any other website that isn't one of these official sources of federal student loan information.
Payment for things you can easily do yourself
Although this isn't technically a scam, paying a third-party company to do something like enroll you in an income-driven repayment plan would be like paying someone to file a tax extension for you. Sure, they provide a service, but doing this yourself would take you just a few minutes and can be easily done for free.
While this is not an exhaustive list, there are a few things you should never pay a third-party company to do. All of these things can be done quickly and easily in most cases, and at no cost to you:
- Apply for loan forgiveness on your behalf.
- Enroll you in a new payment plan.
- Fill out a FAFSA or apply for student aid.
- Consolidate your student loans.
- Get a deferment or forbearance to temporarily postpone your payments.
- Get your student loans out of default.
How to tell if it's a scam
Student loan scams can be tough to spot, so the Department of Education offers some tips to help you determine if a student loan relief offer is a scam or legitimate:
- Up-front payment: The bulk of scams can be detected with this simple tip. Legitimate student loan relief does not require any up-front payment. If you're asked to pay a fee or provide credit card information in order to enroll in some sort of relief program, it's a scam. Plain and simple.
- Immediate forgiveness: Nobody, not even the Department of Education itself, can promise immediate loan forgiveness. Even the most generous student loan forgiveness programs take years to qualify for.
- Special deals: No third-party company can negotiate a "special deal" with the Department of Education or your loan servicer. Student loan repayment plans and forgiveness opportunities are set by law.
- Third-party authorizations: Under no circumstances should you sign a form giving a third-party permission to make decisions with your student loan servicer on your behalf.
- Limited time programs: There are very few temporary student loan relief programs, and the government is very clear about them. For example, there's the temporary Fresh Start initiative to remove student loans from default, and the 12-month on-ramp to repayment that allows borrowers to take more time to start paying their loans. But other than these, there aren't any "limited time" programs, especially when it comes to loan forgiveness.
- Spelling errors: I recently detected a very legitimate-looking scam related to my Amazon Prime account because the word "payment" was misspelled. The same thing applies to student loans. The Department of Education is very careful to proofread its communications.
Know the real sources
As a final suggestion, one of the best ways to detect a student loan scam is to know where legitimate information comes from. The best source of student loan information is the Department of Education, which operates the official Federal Student Aid website (studentaid.gov), and other legitimate sources include Whitehouse.gov and your student loan servicer. Beware of any websites or communications that don't have pages that start with these addresses.
