Avoiding Student Loan Scams, Fraudsters, and Fake Help (Part 1 of 2)
Posted on December 9th, 2019 | By the National Association of Student Loan Administrators, Inc.
There’s an old expression: “Nobody cares more about your money than you do.” Maybe it’s not always technically true for your students, but the lesson behind it is important: when it comes to personal finances, trust no one above yourself. You might be thinking: “Trust no one? Isn’t that a little paranoid? And how can someone learn anything about my money if I don’t trust anyone?” This two-part blog series will explore the answers to those questions and share smart ways to guide your students to help them avoid loan scams.
Seeking advice is one thing. Advice is great; seeking it is encouraged, even essential for students seeking to master their personal finances. Trust is something else. Trust can be dangerous, especially if the trusted person or company doesn’t have your students’ best interests at heart. This two-part blog series will share thoughts on how to best help your students seek guidance and avoid scams related to their student loans.
There will be many people in your students’ lives who tell them what to do with their money. Some have their best interests in mind, others do not. Some are knowledgeable, others are not. So how can a student tell the difference? The truth is they can’t, but the good news is that they don’t need to. Because if they do their own research, ask questions, get second opinions, and avoid making financial decisions under pressure, it won’t matter if they can’t immediately tell if someone is helpful or harmful, wise or misguided. It won’t matter because they’ll figure out if the advice is accurate and right for them and act accordingly. Let’s use an example to illustrate: student loans.
Student Loans Can Be Confusing
Student loans are complicated. There are federal loans and private loans. There are all sorts of loan types, like Perkins, FFEL, Direct, Subsidized, Unsubsidized, Consolidation, and PLUS. There are grants that can turn into loans. There are schools, lenders, servicers, guaranty agencies, and the Department of Education, each with their own unique role in the student loan landscape. There are forbearances, deferments, multiple repayment plans, and numerous discharge and forgiveness options, each with their own eligibility requirements. On top of all of these confusing terms and concepts, student loans are unlike other financial obligations in that the first payment may not be due until years after the money has already been spent. All of this makes understanding student loans particularly difficult.
Wading Through The Confusion
Lawmakers, schools, financial aid officers, parents, and others see this mix of confusion and complexity and try to help students and borrowers the best they can. Others see it as a business opportunity, a chance to profit off the confusion and complexity. While there is nothing wrong with a business that seeks to simplify a challenging environment, if the business actually adds both confusion and cost, consumers should make sure they fully understand what the company offers and whether the service is right for them. Students shouldn’t just trust what someone says, they should do enough research to trust themselves, so they can make an informed decision about their money.
Self-Help Is Free And The Resources Are Out There
Your students have likely seen ads or received calls or texts from companies promising to help with student loan debt. No matter what pitch these companies make, know this: there is nothing these companies can do for your students that they can’t do for themselves, for free.
Also know this: some companies that promise relief are scams. Both the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) have shut down numerous student loan debt relief companies for breaking laws, typically by charging illegal upfront fees and misrepresenting who they are and what they can accomplish.
Helpful Student Resources
So how can you help your students avoid scams? And what can they do if they suspect they may have already fallen for one? It all ties back to them caring about their money more than anyone else and knowing everything they need to about their student loans. Part two of this blog series will detail what to know and look out for, and who to contact if a student thinks they’ve been targeted by a scam.