Is Your Student Loan Repayment Company A Scam? (2024)

One of the most frustrating questions I get everyday (seriously, everyday), from readers is: Is this company that's saying they want to help me with my student loan debt a scam? Is this a student loan consolidation scam or legit company to work with?

My answer? If you're even asking me, it means you went online, searched the company's name, or found my article on Student Loan Scams, and it raised a big red flag. That should tell you something right there.

There are many scams out there, and the CFPB, along with multiple government agencies, have issued warnings to be on the lookout. However, there are some good players out there as well. It’s important to do your homework and know what to look for so that you can make a smart choice.

Plus, with Biden's student loan forgiveness proposal being struck down by the Supreme Court, and student loan payments set to resume soon, people are becoming more desperate for help with their loans - and that opens up the potential to be scammed.

Note:You never need to pay a third-party company to help you with your student loans. You can always do it yourself by going online to Studentaid.gov or calling your loan servicer. If you choose to pay a third party company, make sure you read this article in-depth and fully understand what you're paying for before moving forward.

Is It A Scam, Unnecessary, Or Do You Know What You're Getting?

First, I want to clearly distinguish between scam companies, companies who are charging you for unnecessary services, and companies who are up front about charging you for a service you’re interested in.

Scam companies are student loan assistance companies who charge you for a service and then never do it, or don’t do it 100%. For example, the firm might advertise ‘student loan forgiveness’ or ‘lower student loan payments.’ They charge you hundreds of dollars and say ‘they’ can do it but in reality don’t actually do anything at all. You pay the money, the firm does nothing at all and is shut down 6 months later. This is a scam.

However, there are legitimatestudent loan assistance companies that simply charge you for services that you can go do yourself for free. For example, they might advertisestudent loan consolidation, and charge you to consolidate your student loans – even if you don’t need a consolidation, or a consolidation is not right for your situation based on the programs available you! This is what's known as a student loan consolidation scam.

But, remember, student loan consolidation is a free service offered by the Department of Education and you can sign up and do it yourself for at StudentLoan.gov. If you did use a company, you would need to make sure that they know (but this is what you would pay them to already know!) which loans, if any, need to be consolidated. It is possible to make your situation worse by consolidating!

Just like doing your taxes, it could make sense to do it yourself, or it could make sense to pay a CPA. Like taxes though, you need to make sure you have the right CPA or you could end up with problems you didn’t have before. You need to decide for yourself. Just realize that you have options. If you do decide that you don’t want to deal with it and paying someone makes more sense for you, you can see some of our recommendation at the bottom of this article.

For student loan consolidation, read out guide on The Right Way To Do Student Loan Consolidation.

The Most Common Student Loan Scams

There are several different types of student loan scams, but the most common is a variation of the advance fee scam. This is where you pay for a service (in this case something to do with your student loans) but the company never does any work or produces any results for you.

When it comes to student loans, the scam typically unfolds something like this. The company is offering student loan forgiveness, a lower payment, or consolidation. In exchange for doing it for you, you just have to make 3-6 payments of $199. Once they’ve received all your payments, you’ll be set, right? In the meantime, all they will do is set your loan on forbearance so you won’t have to make a student loan payment. This is not enough.

The problem is, these scams usually involve the company taking your money, your student loans remain in forbearance for months or years, and the borrower finds out that the forbearance has expired and that nothing was done.

If a company is going to put your loans into forbearance, make sure you follow up and know exactly why, for how long, and any action that is being required from you during the process to keep thing progressing. Forbearances should only used if absolutely necessary and only for a very limited time as a buffer while the borrower is being submitted and approved for the different programs available to them to enhance their loan situation.

Don't think this kind of thing is happening? It's gotten so bad that the Consumer Finance Protection Bureau has asked Google to step in and filter results around student loan debt and prevent advertisers from advertising topics like Obama Student Loan Forgiveness.

Dealing With Student Loan Relief Fees

Remember, student loan consolidation can be done for free at StudentAid.gov. Paying a fee for help with your student loans may not be necessary for you, just like you may want to do your own taxes yourself, but just paying a service in itself for what they offer and fulfill is not a scam. It’s only a scam if you pay for a service and the company does not do what you paid them for or if they mislead you on the services you paid them for. Working with a company, like the ones recommended below, can be useful if you don’t want to do it yourself, or would prefer it to be done by true professionals who can ensure the loans are consolidated and managed properly.

If you’re going to pay a company to help you with your loans, you should know specifically what you’re paying them for. You are paying them to help you decide what the best repayment strategy are, and which forgiveness options are available for YOUR student loan debt, then to manage and process the paperwork on your behalf, on time, and in the correct order. There are very few companies that exist today that are successful at this process due to the dynamic complexities currently impacting the student loan industry - there are countless loan types, programs, and qualifications that make the entire process difficult.

A legit company will charge you an amount, but should put that amount into a special third party account and only get paid when they have successfully completed the work. Since paperwork processing and submitting takes time, it could be a 3-6 month process, or longer. As such, while you might pay something up front, it should be clear to you that this money is going into an third party account and you would get it back if the work is not completed.

Big Student Loan ScamRed Flags

If you have this happen to you, it's a big giveaway that you are likely going to be scammed, or at least asked to pay for something youare not getting.

Forbearance - Putting your loans into forbearance should only be used for very specific situations and on a very ‘as needed’ basis – it’s not a blanket approach and not the solution. If your loans are going into forbearance, make sure you understand why.

Stop Making Your Student LoanPayments -No company should ever tell you explicitly to not make your student loan payments. Always pay the minimum on your statement.

Pay Us, Not Them, We'll Make Your Payments For You - big red flag, just shady having someone else make payments on your behalf. What are they hiding from you?

Did They Contact You Using An Auto-Dial System (or Robo-Dialer)? -If they contacted you and you ‘pressed #1’ to be connected, this is a big red flag and the company is most likely breaking the law. Run! Specifically, be aware of marketing pieces with government seals that have your financial information splattered all over it. Example would be, ‘Your student loan of $56,987 has been Pre-Qualified to be forgiven!’ If you see this, run!

Any Company Claiming To Be Working With The Department Of Education- None of these companies work with the Department of Education, and the Department of Education will never call you. All correspondence with them will be via mail, so don't fall for anyone telling you this.

How To Research The Company

The best way to protect yourself is to research the company before you do business with them. There are a few places to start.

First, look on the basic list of known companies to watch out for. We call out several companies that have been known to charge for services that are not needed on this article aboutNot Paying For Student Loan Consolidation.

Second, check and see if they are just a document processing company where you are still going to have to do the work yourself at the end of the day. Avoid document processing companies, as these companies don’t provide any financial help, are not licensed or bonded, and simply charge you large amounts of money to do paperwork that may not even be accurate, and which you can easily do yourself.

To know for sure, they must list it on their website or disclaimer. Many student loan companies opt for this because the other option is to be a bonafide licensed debt relief company (which provides advice), but that requires special licensing in most states.

Here's an example of the fine print wherea companyadmits to not providing financial advice and only act as a document processor:

Finally, trust your instincts. Student loans are very regulated and all of the possible ways to get help are specifically outlined by the Department of Education. There isn’t anything over the top special that any company can do for you, except a little education and convenience. If something sounds too good to be true, it most likely is.

Where To Get Real Help

If you want to get help for your student loans, make sure you’re taking the smart steps forward. The first and best resource available isStudentAid.gov. This is the government’s website for student loans, and it’s where you can begin to educate yourself on everything from loan consolidation to repayment plans.

Next, you can call your student loan servicing company and see if they can assist you. If you feel like you're not getting anywhere with your loan servicer, you can file a complaint with the Consumer Finance Protect Bureau.

Third, as a last resort, you can consider enlisting the help of a student loan lawyer to look over your situation and see if they can help. Learn more about finding a student loan lawyer here.

You can also consider hiring a CFA to help you with your student loans. We recommendThe Student Loan Plannerto help you put together a solid financial plan for your student loan debt. Check outThe Student Loan Plannerhere.

If you have private student loans, refinancing is typically your best option (As a reminder – we don’t usually think it’s a good idea to refinance Federal loans). We recommendCredible to compare different lenders and find the best rate and payment for you. It’s free to compare and only takes about 2 minutes. As a bonus, College Investor readers will get up to a $1,000 bonus when they refinance through Credible!

Is Your Student Loan Repayment Company A Scam? (2024)

FAQs

Is Your Student Loan Repayment Company A Scam? ›

Here are some signs to help you identify a scam by a student loan debt relief company: They require you to pay up-front or monthly fees for help. If a company requires a fee before they actually do anything, that's a huge red flag—especially if they try to get your credit card number or bank account information.

How to identify a student loan scam? ›

How do I identify student loan or student aid scams?
  1. They require you to pay up-front or monthly fees for help. ...
  2. They promise immediate and total loan forgiveness or cancellation. ...
  3. They ask for your username and password. ...
  4. They ask you to sign and submit a third-party authorization form or a power of attorney.

Is the student loan debt department email a scam? ›

Did you get an email about debt relief from the “Student-Loan Debt Department” after the White House's latest debt relief plan announcement? Here's why it's a scam.

What is the legitimate student loan website? ›

The most important thing to know is this: the best source of information on your federal student loans is Federal Student Aid. Also, you don't need to pay to sign up for any programs to lower your payments or get forgiveness — it's all free at StudentAid.gov/repay.

Are there companies that will pay your student loans? ›

Fidelity Investments

The financial services firm Fidelity Investments helps its employees pay off student loan debt, and it also offers tuition reimbursem*nt to employees. Fidelity offers up to $10,000 in contributions for student loan repayment.

How do I know if a loan company is scamming me? ›

  • Avoid unsolicited offers. Legitimate personal loan lenders don't usually make the first move to give you a personal loan.
  • No posted state registration, a bad online reputation and promises of “guaranteed approval” are all red flags.
  • Personal loan lenders never ask for a gift card in order to get a loan.
Apr 22, 2024

What student loan company is being sued? ›

Over the past decade, Navient has faced consumer protection lawsuits from state and federal regulators and law enforcement officials and continues to defend against allegations that it systematically cheated millions of its customers out of their rights to affordable loan payments.

How do I know if a debt collector email is real? ›

Whenever someone tries to collect a debt, ask for all of their company's information, including:
  1. The collector's full name.
  2. Company name.
  3. Company address.
  4. Company phone number.
  5. Company website address.
  6. Company email.

Is https studentaid gov a scam? ›

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.

Is student loan forgiveness real? ›

If you work full time for a government or nonprofit organization, you may qualify for forgiveness of the entire remaining balance of your Direct Loans after you've made 120 qualifying payments—i.e., 10 years of payments. To benefit from PSLF, you need to repay your federal student loans under an IDR plan.

Who sends the email for student loan forgiveness? ›

Following a wave of student loan forgiveness approvals, “380,000 borrowers who are within two years, or 24 qualifying payments, of receiving forgiveness under PSLF will also receive an email from President Biden starting next week thanking them for their service and notifying them that if they continue in their public ...

What is the name of my student loan company? ›

To find out who your loan servicer is, visit your account dashboard and scroll down to the “My Loan Servicers” section, or. call the Federal Student Aid Information Center (FSAIC) at 1-800-433-3243.

How do I verify a student loan? ›

For federal student loans, you can find information through the U.S. Department of Education. For private student loans, you can contact your student loan servicer.

Is anyone paying their student loans? ›

A huge chunk of student-loan borrowers simply aren't paying. The pandemic pause on payments may have ended in October, but roughly 40% of borrowers who had bills due that month sat on their wallets and didn't send a dime to the government.

Can I get a student loan paid directly to me? ›

Student loans can be disbursed to the school or the student. In most cases, the loan funds are sent to the school in what's called the “school-channel” method. However, in some cases, proceeds can be sent to the student in the “direct-to-consumer” method.

How much does the average American owe in student loans? ›

Average student loan debt in America

51% of 2021-22 bachelor's degree recipients graduated with an average of $29,400 in student loan debt. Among all borrowers, the average student loan debt in 2023 was $38,290. 53% of federal student loan borrowers owe $20,000 or less.

How do I get out of a student loan scam? ›

Contact your federal loan servicer to make sure no unwanted actions were taken on your loans. Contact your bank or credit card company to stop payments to the company that is scamming you. Submit a complaint to the Department of Education, the Federal Trade Commission, and/or the Consumer Financial Protection Bureau.

How do I know if someone took out a student loan in my name? ›

That's why it's crucial to check your credit report for any unfamiliar entries regularly. The three major credit reporting agencies – Equifax, Experian, and TransUnion – are required by federal law to provide you with a free report once a year.

Are student loans public information? ›

The privacy of financial aid records (and admission, enrollment, and other records) kept by an educational institution is protected by the Family Educational Rights and Privacy Act (FERPA).

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