5 Ways to Identify a Student Loan Scam in 2024

There’s been a lot of student loan scams particularly common over the past few years. Federal and state consumer protection agencies are starting to take action against these scams. However, this article should guide you with ways to spot a student loan scam.

Ways to Identify a Student Loan Scam

How to Spot and Report Student Loan Scams

Student loan forgiveness scams are probably the worst scams. It’s bad enough you’ve got student loans you need to clear off.

Now, you’ve also got to stay alert for scumbags trying to pull one over on you. However, you don’t have to fall for it!

The sooner you can identify a student loan scam when you see it, the more likely you are to avoid it, saving yourself time, money, and stress.

Let’s see the 5 ways to identify a student loan scam to watch out for.

Simple Ways to Identify a Student Loan Scam

These scams vary widely as some are looking to steal your personal or financial information, while others are trying to profit from high fees or misleading claims.

Here are some ways to identify a student loan scam:

1. They Ask You to Pay for Loan Forgiveness

If someone states they can forgive your $150,000 student loan balance for the “small fee” of $5,000 upfront, don’t believe them.

They’ll steal your money, and you may never hear from them again plus, you’ll still have your student loans.

There’s no chance to apply for federal student loan forgiveness programs for free.

Most of the time, debt-relief firms that ask you to pay a fee for their services will just set you up with an income-driven repayment (IDR) plan which you can do for free through your loan servicer.

2. Charges Monthly Fees

Help obtaining or repaying student loans usually involves a one-time event, so there is no legitimate justification for charging a recurring fee.

Often, student loan scams fail to adequately disclose that the fees are charged every month.

If the service asks you to send your monthly student loan payment to them, the money might not ever be paid to the lender or might be paid late, ruining your credit.

3. Asks 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 since they can use this information to apply for an FSA ID.

Your name, Social Security Number, and date of birth are all someone needs to steal your identity.

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4. They Pressure You to “Act Now”

Ways to Identify a Student Loan Scam

Student loan forgiveness scams can be downright so ruthless.

They tend to target desperate borrowers with huge amounts of student loan debt and pressure you to “act now or miss out on this one-time student loan forgiveness.”

Anyone playing the urgent card when it comes to student loan forgiveness is a bona fide scammer.

You can take as much time as you need to make the right judgment about what to do with your student loans.

Any official forgiveness will always have a reasonable deadline you need to apply by.

So, if someone is intimidating you or saying that you’ll lose your one chance at loan forgiveness if you don’t give them money ASAP, hang up the phone and never talk to them again.

5. Their Promises Sound too Good to Be True

If it sounds too good to be true, it probably is a lie.

If you get a call from someone saying something like, “You’re suddenly qualified for immediate student loan forgiveness,” put your guard up.

Most student loan forgiveness demands years of making qualifying payments or working a specific job.

Most likely, you already know if you’re enrolled in a forgiveness program or a payment plan that promises forgiveness after a specific number of payments.

So, if you get notified that you’re eligible for immediate loan forgiveness out of nowhere, it’s probably a scam.

Your best bet is to call your loan servicer to figure out if it’s real.

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How to Report a Student Loan Forgiveness Scam

Ways to Identify a Student Loan Scam

If you think you’ve been duped, reach out to your federal loan servicer to make sure your account hasn’t been messed with.

If you sent the scammer any funds, call your bank ASAP and tell them to cancel the payment.

Additionally, be sure to report any scammers to the Consumer Financial Protection Bureau, the Federal Trade Commission, and the Federal Student Aid office.

By putting these scammers on the government’s watch list, hopefully, you can keep them from hustling anyone else!

How to Identify Legitimate Loan Servicers

The Department of Education operates directly with only six loan servicing companies which include Edfinancial, Mohela, Advantage, Nelnet, ECSI, and Default Resolution Group.

You can discover your student loan servicer through your account dashboard on the Federal Student Aid website, or by calling the Federal Student Aid Information Center at 1-800-433-3243.

If you are still in school, contact your financial aid office directly for any details regarding your loan status.

To wrap up, it’s to be expected that some unscrupulous companies are going to try and take advantage of stressed-out consumers looking for a solution.

So it’s worth remembering what is and isn’t possible when it comes to student loan debt, as well as the signs that a student loan “relief” program is very likely a scam.

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