Understanding And Avoiding Common Student Loan Scams
With the increase in student loan debts, scammers have devised numerous ways to leech off money from the uninformed and the vulnerable.
They usually target the ones that have amassed a huge loan balance and are now unable or struggling to pay it off. These scams are crafted diligently and set up in a way that sounds too perfect.
Here are the warning signs that you should be aware of so you won’t be parted from your hard-earned money.
What Is A Student Loan Scam?
Student loan scams are scams perpetrated by private companies and individual agents to prey on individuals who do not have enough knowledge about the loans or are extremely desperate to shrug it off.
For instance, imagine you need some assistance with the ongoing student loan like readjusting the monthly payment, paying off a chunk of the outstanding, applying for a forbearance, or requesting a deferment. You might end up with a scammer who’ll make it difficult for you to get things done while squeezing money out of your pocket.
Top Warning Signs
Listed below are the most common red flags and scams that you might encounter when trying to adjust an ongoing student loan.
Requiring Payment For Filling Out Forms
This is the most common type of scam run by private companies hoping to take your hard-earned money without giving you updated information. It is true that the payment of your student loan can be lowered and adjusted as per your monthly income. While the application process is free and can be done on your own, many companies charge exorbitant amounts without clarifying the reason for it.
It is acceptable if you are aware that filling up forms is free and can be done online, but you are paying someone to help you to fill out the form. The scam lies in the fact that these companies charge people without letting them know that the application process doesn’t cost a penny.
Demanding Payment For Deferment Or Forbearance
In times of financial crisis, most borrowers opt for student loan deferment or forbearance options. In both options, you won’t be charged anything upfront by the lender. However, interest may accrue over the period as per the loan terms.
The application process for this is completely free and can be done online . However, companies and agents don’t tell you that there is no fee involved to apply for such repayment terms. Instead, they charge hundreds of dollars by telling you that opting for such options is chargeable as per the lender.
Again, when you know that the process is free but find it complicated to fill out the form on your own, you may seek assistance and in return pay them a fee for helping you out. However, charging money on the pretext of processing fees or upfront charges is a straightforward scam.
Getting Loans Forgiven For A Fee
When you take out a student loan, you will have to repay it sooner or later. Yes, there are a few exceptions like a Public Service Loan Forgiveness (PSLF) program through which you can exempt yourself from paying the full amount. Yet, to take advantage of it, the conditions have to be met and the application has to be filed. You can do this for free and yourself by filing the application form.
However, if a company or an agent tells you that they can negotiate forgiveness of the loan in exchange for a fee, then it is a scam. It is naïve to even think that your loan lender would simply forgive your loan because you are going through financial difficulties. The terms are clearly mentioned in your loan contract and if you need to apply for forgiveness, the best way to do so is by directly contacting the lender, not via third-parties.
Asking For Your Personal Details
Giving out personal details like account numbers, social security numbers, and other sensitive information can cause great losses. Legitimate services do not ask for such private details nor will they ask you for any kind of personal information.
Scammers ask for all kinds of personal details, and this can be used against you for a multitude of purposes including making changes to your loan and identity theft. If a private company contacts you for private details, simply do not share any information. If you are confused about whether it’s a scam or not, you can contact the lender directly and report the incident for more clarity.
In order to avoid student loan scams, it is important to identify them as quickly as possible. The most notable thing to remember is that applications are free and lenders don’t charge an upfront fee to restructure payment plans.
It is unwise to think that paying a comparatively small amount would remove your loan. Above all, steer clear of companies and agents that press you hard to share personal details or charge you money without explaining the reason behind it.