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Hallie Ayres
Contributing Writer

With colleges and universities weighing options to conduct classes in person or virtually this fall, students no doubt already have a fair amount of stress regarding the upcoming semester. Whether classes are online or not, an estimated 70% of students will likely take out student loans to help finance their continued education. According to Student Loan Hero, 69% of 2019 graduates who took out student loans entered post-grad life with an average $29,900 accumulated in student loan debt. Nationwide, there is currently over $1.5 trillion accumulated in student loan debt. Loans and financial aid are already such great sources of anxiety, so here are three of the most common student loan scams to avoid.

The advanced fee scam

Student loan repayment scammers can turn up alongside legitimate organizations in search results and often make extensive efforts to appear genuine, promising to help pay off debt. There are a few different tactics that scammers may implement to swindle stressed students.

One of the most common scams, according to The College Investor, is the advanced fee scam, in which a scammer offers a range of services — loan forgiveness, finding the best interest rates or negotiating favorable loan terms — on the condition that the student pays a small fee up front for these services, either a portion of the loan amount or a flat rate.

There are never any circumstances in which a borrower should have to pay money up front, so this should be an immediate red flag. Federal student loans charge a 1% default fee, and many private loans charge some sort of disbursement fee, but, in accordance with Federal Trade Commission guidelines, it’s illegal for companies to charge borrowers before they assist with a loan.

Many scammers will attempt to charge for services that a student loan servicer already does for free. For this reason, it’s crucial for students to know the ins and outs of their own loan providers. The best starting point for this is to set up online accounts with providers so that borrowers can track progress and maintain records of communications. If an email or letter looks suspicious, the online portal can serve as a means of confirming the legitimacy of any communication.

Once these online accounts have been set up, it’s imperative to never give away login information. Scammers often claim to need usernames and passwords in order to manage loans, but this places borrowers in a precarious position of losing control of their accounts, and no legitimate company would ever request this information.

Total elimination of debt

Another very common scam involves fraudsters claiming to be able to completely eliminate a borrower’s student loan debt. Without a federally qualifying reason, such as school closure, identity theft, death or permanent disability, student loan debt can never be eliminated. There is also no such thing as fast loan forgiveness.

If a third party company offers a deal that seems too good to be true, it most likely is. Loan forgiveness is earned only after a number of qualifying payments are made, and there is no way to expedite this process for federal loans.

In the same vein, borrowers should be wary of any offers that appear as limited time offers pressuring those in debt to act now to claim some sort of reward. Because loan debt cannot magically disappear, there is generally no need to rush to meet any deadline that has not already been prescribed by a payment plan.

Loan consolidation scams

Scammers will also offer loan consolidation services while charging a processing or administrative fee. However, federal student loan consolidation can be done by the borrower at no charge at all. Any company that claims to have an affiliation with the Department of Education in order to easily consolidate loans will most likely be a scam.

One last red flag to keep an eye out for is whether or not a company advertises on social media or on search engines. If a company is spending money on advertising, it generally means they are seeking to turn a profit. Since loan consolidation is a free service offered by the federal government, a for-profit company could be a scheme to swindle borrowers into paying for otherwise free services. For this reason, it’s always important to research before giving personal information to any online forms reached through advertising.

In the unfortunate event that someone comes across a scam related to student loan debt, borrowers should report it to the Federal Trade Commission and the state attorney general’s office, both of which rely heavily on consumer complaints in order to rid the student loan realm of scammers whenever possible.

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