There’s been a lot of student loan scam 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 out 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 red flags you need to already be wary of:
Advance-Fee Loan Scams
It is illegal for debt relief and credit repair services to charge a fee before providing assistance. If they charge an up-front fee, they are violating federal law, such as the Credit Repair Organizations Act of 1996 (CROA), as well as many state laws.
Also, federal and private student loans do not require borrowers to pay a fee before obtaining a loan. Instead, the origination fees, default/guarantee fees and other loan fees are deducted from the disbursements.
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.
Tip: Be wary if a loan assistance company asks for your bank account information or your credit card number.
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 a FSA ID.
Your name, Social Security Number and date of birth are all someone needs to steal your identity.
Contact your loan servicer to revoke any power of attorney or third-party authorization agreement that your servicer has on file. You should also make sure no unwanted actions were taken on your loans.
Contact your bank or credit card company, and request that payments to the company be stopped.