Last week we shared that the best way for borrowers to avoid a student loan debt relief scam is to fully understand their student loans and to remember there’s nothing a company can do for them that they can’t do for themselves, for free. This week’s blog shares ways to help identify if a company doesn’t have a student’s best interest at heart and what to do about it.
Armed with the knowledge from our last blog post, your students will know whether a company’s pitch is legitimate and if they can benefit from their services. As a reminder, borrowers can learn about their own federal student loans at the National Student Loan Data System or studentaid.ed.gov. Both government websites show borrowers their federal loans. Any private loans they might have on their credit report can be identified by obtaining an annual free credit report.
In addition to understanding their own student loans, here are some examples of warning signs your students should look for that may signal a scam. They should be cautious when the company:
1. Asks for Upfront Fees
It’s illegal for companies to charge someone before they help them.
2. Promises Fast Loan Forgiveness or a Balance Reduction
Loan forgiveness takes many years and is only for borrowers who meet specific qualifications. If a company promises quick loan forgiveness or a drastic balance reduction before understanding a borrower’s unique situation, look out!
3. Uses Names and Seals that Seem Official
Companies may use names, seals, and logos that suggest they are affiliated with the Department of Education or other government entities or programs. Companies may say or imply that they have access to certain special repayment plans or forgiveness programs; they don’t. The Department of Education has tons of good information on their approved contracted servicers.
4. Rushes Your Decision Making
Scammers count on borrowers not having all the information necessary to make an informed decision. They rely on salespeople to close deals, which means not giving borrowers a chance to reflect or research. If a company states that certain options are expiring or pressures borrowers into making immediate payments or signing up right away, be wary.
5. Asks For FSA ID
If a company claims that they need a borrower’s FSA ID to help them, look out. Dishonest people could use that information to take control of the borrower’s account and their personal information.
What To Do
If a student believes they’ve been contacted or swindled by a scam, tell them to report it to the Federal Trade Commission(FTC) and their State Attorney General. The FTC and State Attorneys General have sued over a dozen student debt relief companies. They rely on complaints from borrowers to understand who the bad actors are and how they operate. They can close down companies that harm borrowers and even get refunds back to those who have been scammed.
Borrowers should also reach out to their servicers to make sure their loans are in good standing and to ask questions about their options.
Understanding and taking ownership of their student loans can be your students’ first step to understanding and mastering all of their finances. For many, student loans are one of if not the first significant financial obligation they’ll have. If they decide to care and know more about their loans than anyone else, they’ll be able to effortlessly judge whether someone’s advice is good or bad and to identify scams or questionable companies and respond appropriately. If they can do this with their student loans, they can do it with any financial obligation or instrument, which will serve them well long after they are out of school.
You can help your students realize this important lesson: no one should care or know more about their money than they do.
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