Student Loan Consolidation Scams: As a student, paying off your loan is one of the challenges you may face in life. When it is time to pay off your student loans, you may be looking for outlets to help you.
There are options that you can choose from. Options like repayment plans, consolidation and deferment. However, you should be careful of the scams associated with them.
You may be told that your student loan debt could be wiped out and you would owe nothing. This may spark your interest, right? Of course it would. However, if it sounds too good to be true, then you probably should be mindful of it.
Things to Note about a Student Loan Consolidation Scam
Also, a salesperson will pressure you into signing up.
You will be asked to share sensitive personal information.
The company usually advertises on social media or shows up in search engine ads.
Some Signs of a Student Loan Scam
Beware of the following warning signs of a student loan scam:
Borrowers Must Pay a Fee for Student Loan Help
If you have to pay money to get money, it is probably a scam. Most scams are run for profit, so charging a fee is a sign of a scam.
It is illegal for debt relief and credit repair services to charge a fee before providing assistance. While avoiding student loan consolidation scam, please what out for advance fee charge.
If they charge an up-front fee, they are violating federal law. Also, federal and private student loans do not require borrowers to pay a fee before obtaining a loan.
Charges monthly fees
In avoiding student loan consolidation scam, please be wary of monthly charges. Help obtaining or repaying student loans usually involves a one-time event. Thus, there is no legitimate justification for charging a recurring fee.
Asking for your FSA ID
The FSA ID is an electronic signature, used to apply for financial aid and sign loan promissory notes. Never give anyone your FSA ID, no more than you would give them a blank check.
Also, never sign a power of attorney for your student loans. Another red flag is if a company asks for your Social Security Number and date of birth, please do not give.
They can use this information to apply for a FSA ID. Your name, Social Security Number and date of birth are all someone needs to steal your identity.
Company Names and Logos that seem Official
Also, when avoiding student loan consolidation scam, watch out for the company logos and names.
Common examples include words like “federal,” “direct” and “national” in the company name. Or they can use a tree or an eagle in the logo.
How Student Loan Consolidation Scam Works
The scam works like this. A random company calls you and offers to consolidate the student loans that you have. This company will often tell you that there is a processing fee or administrative fee that needs to be paid.
The company will reassure you that once you pay the fee, your student loans will be consolidated. But, guess what! Your student loans will never be consolidated.
The Problem with Student Consolidation Scam
There are a few problems with this consolidation scam,. They are as follows;
The first one is the most obvious one in which the company just takes your money and does nothing for you. You will find that you can never get a hold of the company and your money quickly vanishes from your bank account.
The next problem is that the company may actually consolidate any private student loans that you have. However, they will place you in a worse position than you were in originally.
This means that you may end up owing more money than expected monthly. Or your interest rate may shoot through the roof. Since these student loan consolidation scam companies do not care about you, they do not care if they negatively impact your loan or not.
Avoiding Student Loan Consolidation Scam
The following are some of the ways of avoiding student loan consolidation scam;
Keeping your credit score and money safe
While avoiding student loan consolidation scam, keeping your credit score and money safe is essential. As a matter of fact, it should be two of your top priorities.
If you find that a company is calling you to consolidate your student loans, do not go through the process. If you want to refinance or consolidate your loans, you can do so through a legitimate loan provider.
Always ask for the Company’s Details
Before you agree to do anything, ask for the name, phone number, and address of the company. This is a vital step in avoiding student loan consolidation scam.
Make your Loan Provider work with the Consolidation Company
You need to also make sure that your loan provider works with the company that is calling you.
If your loan provider will not, then you do not want to consolidate your loans through them as you may be stuck in a sticky situation.
Never send money randomly
Never send money to a company that is demanding you wire them money or you pay a hefty service fee. This is important in avoiding student loan consolidation scam. Again, the process is free. If you do wire the company money, you may never hear from them again.
Despite the scam associated with it, please be informed that there are legit ways to consolidate student loans.
However, if you think someone is targeting you for a student loan consolidation scam, speak with your loan provider and alert the Federal Trade Commission right away.