How To Avoid Student Loan Forgiveness Scams [Full Guide]

student loan forgiveness scams

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Have you had a letter, an email, or calls about student loan forgiveness? If so, wait, don’t send your personal information yet. It could be one of those student loan forgiveness scams

Student loan scams come in various forms and sizes. Current events like Biden loan forgiveness or pandemic grant may make you more susceptible to scammers. Sometimes, the scam is as simple as promising to work quickly and save you money. 

Student loan forgiveness scams don’t have to be complicated. So this guide will explore all the strategies these scammers use and ways to prevent wasting more money. 

With that said, let’s dive right in. 

Are There Student Loan Forgiveness Scams? 

A big Yes. Student loan scams are so common that even student loans can feel like a scam sometimes. For example, one of the biggest student loan companies, Navient, agreed to a $1.85 billion settlement with 38 states and the District of Columbia in January 2022. 


The CFPB and several states filed lawsuits against the organization due to accusations that it created predatory student loans. As a result, over 66,000 borrowers nationwide owe the corporation $1.7 billion in subprime private student loan balances, which the company will cancel.

Difficulty In Getting Actual Help

student loan forgiveness scams

While borrowers have the worst student loan companies to deal with, they also must be cautious about student loan forgiveness scams. 

Student loan scammers may make it challenging for borrowers to obtain legitimate assistance when they need help with some aspects of their loans, such as:

  • lowering their balance or monthly payment, 
  • repaying their loans more quickly, 
  • pausing payments temporarily, or 
  • getting their loans out of default.

Student Loan Forgiveness Scams Lurk In Google Search Ads 

According to American Banker, searching loan forgiveness on Google reveals ads that lead individuals to student loan forgiveness scams or appear to violate content policies. And that is raising public uncertainty as the Joe Biden administration mulls on student debt.

The Tech Transparency Project, a research branch of the non-profit Campaign for Accountability, evaluated the most popular searches linked to student loans to track the adverts Google puts out. 

According to TTP, 29 of the 242 ads they examined violated Google standards or had “scam characteristics,” representing about 12 percent of the total.

Of course, a Google spokeswoman stated that Google’s standards prohibit advertisers from making false claims about their affiliation with the government. She added that those ads are being reviewed, and any that violate their policy will be removed.

However, according to TTP, this is particularly problematic, as more people are likely to search for federal student loan relief, especially during this time.

So are there student loan forgiveness scams? Yes, and unfortunately, they are increasing in number. 

Student Loan Forgiveness Scam Calls 

Society has always been a target for scammers. And one of the ways they do that is through student loan scam calls. It’s the same thing that people do when doing their taxes. 

Scammers impersonating the Internal Revenue Service (IRS) call unsuspecting taxpayers and demand immediate payment.

Remember: debt relief companies aren’t going to pay off your loans if they phone you and say they can. So always be on the look out for calls about student loan forgiveness.

But also keep in mind that not all debt relief companies are scammers. So how do you determine a legit company from a scammer? We’ll answer that shortly. 

But know that loan forgiveness and repayment programs from the U.S. Education Department are available to eligible borrowers for no cost through their loan servicer.

With that said, let’s find out how to spot student loan scam calls. 

How To Spot Student Loan Forgiveness Scam Calls 

student loan forgiveness scams

1. Asked To Give Your FSA ID Password

Almost all student loan scam calls ask for your FSA ID password. The Education Department or your loan servicer won’t request your FSA ID password. The FSA ID is purposefully used to sign legally binding documents electronically. 

It’s just as legally binding as a written signature.

So a debt relief company will have the power to take any action, make choices for you, and act on your behalf if you provide them with this information or sign a Power of Attorney.

You are still liable for any interest charges, remaining payments, and late fees, even if the company just charges you for its services but never makes any payments on your behalf.

2. Pay An Upfront Fee Or Ongoing Monthly Charges 

You are being scammed if you are requested to pay fees in advance. If you’re having trouble keeping up with your monthly payments, your loan servicer can help you get a reasonable repayment plan. And it comes with no charge. 

3. Promises To Offer Immediate Student Loan Forgiveness. 

Nobody can guarantee immediate and complete loan forgiveness or cancellation. So remember when you get that call; it’s one of those calls about student loan forgiveness

Federal student loan forgiveness takes years of qualifying payments and (or) work in specific sectors. So if you hear such messages from a company, you need to be on high alert for student loan forgiveness scams. 

If you want to find out if you’re eligible for student loan forgiveness, contact your loan servicer.

What If You’ve Already Received Student Loan Forgiveness Scam Calls? 

If you’ve already paid a debt relief company or provided personal information to them:

  • Log into your account and change your FSA ID.
  • Speak with your loan servicer to cancel any third-party authorization or power of attorney agreements they may have on record.
  • Check your loans to make sure no improper actions were made.
  • Stop paying the debt relief companies by contacting your bank or credit card company.
  • Submit a complaint to the Federal Trade Commission.
  • Use the Federal Student Aid Feedback System to report any questionable activities.

Are Emails About Student Loan Forgiveness Legit? 

student loan forgiveness scams

Receiving emails promising debt relief for student loan holders is not unusual. However, you need to be extra vigilant because some emails can be student loan forgiveness scams. 

It’s understandable for some borrowers to respond due to their desperate need to get out of debt. So here are some warning signs to watch out for if you’ve received a letter offering to pay off your student loans.

Legit Signs That Your Emails Might Be Student Loan Forgiveness Scams 

1. You’ve Not Heard Of The Company Before

Your loan servicer should be your first point of contact if you have federal student loans. And you can view your account details on the official Federal Student Aid website. 

As for private loans, it’s best to speak with your loan lender or servicer about any available programs, which should be outlined in detail on the servicer’s website.

You should be wary of any student loan relief offers you receive from companies you’ve never heard of. Unfortunately, this also includes programs you’re not familiar with. It might not be student loan forgiveness scams. But it’s worth checking out. 

2. Scammers Tell You Your Loan Balance Can Be Reduced Or Canceled 

Making loan payments is the only method to lower your student loan debt. However, there are tight requirements for participation. And the sum is forgiven once those requirements have been satisfied, even if some federal loans may be eligible for student loan forgiveness programs. 

And remember, it’s not at the time of refinancing. So any business that claims to be able to lower your debt is undoubtedly lying.

3. A Scam Company Pressures You To Act Fast 

Scam companies may claim that benefits like Public Service Loan Forgiveness are being phased out because of a new administration. You should be skeptical of these claims. 

For example, in the case of PSLF, you can apply for free and without paying a third-party company if you’re eligible and meet the eligibility requirements.

The deadlines for federal student loan programs, such as recertifying income-driven repayments every year, are communicated to borrowers well in advance. So even though there’s a deadline, you don’t need to act as scammers pressure you to immediately.

Everyone should be able to take advantage of legal programs. But, unfortunately, many companies out there approach you and say that a deal is only available for a short period.

4. The Email Has An Advertisement-Like Appearance 

Without flashy gimmicks or high-pressure sales tactics, a genuine letter will arrive in an envelope, have a letterhead, and clearly describe qualifying requirements. 

Watch for excessive exclamation points, postcard use, and overly dramatic writing. These are all possible warning signs. Also, be sure to verify the source of any emails you receive. 

Emails sent from online services like Yahoo, Gmail, etc., other than the company providing debt relief, should be taken with caution.

5. No Reliable Reviews From The Company And Its Services 

You can find reputable reviews on legit sources online. If you’re considering student loan refinancing, you should be able to get all the information you need about the company. That will help you feel more at ease about the company’s validity. 

You can check at places like Better Business Bureau accreditation (BBB).

What Can You Do If You’ve Already Fallen For The Scam?

Remain calm. Change your account passwords so that the business can no longer access them. It’s the same steps discussed in the previous section. Any documentation, including a power of attorney, should be removed by contacting your loan servicer. 

Their authority to decide on your behalf will end if you revoke your power of attorney. If possible, request a stop payment on wire transactions and checks, and talk to the fraudsters about your credit card purchases.

How Do Student Loan Scams Work? 

student loan forgiveness scams

According to the Federal Trade Commission, over $1.7 million was sent to student loan borrowers. And the reason? Scam companies misled these borrowers into thinking it was linked with the Education Department in February 2021.

Unfortunately, these types of incidents have been occurring for a long time. But unfortunately, this recent incident isn’t the first. 

For instance, according to the Federal Trade Commission, scam companies have illegally taken over $95 million in advance fees from borrowers using misleading tactics. And it has been happening for over several years. 

So how do these student loan forgiveness scams work? They come in various forms. We’ve already touched on some points in the previous sections. But we’ll take a closer look in this section. Let’s begin. 

1. The Lawsuit Scam 

With this type of scam, a law firm claims it can help you pay off all of your student debt. The attorney will want a payment to handle this for you, claiming you would save thousands of dollars.

These fraudsters may even persuade you to send them your regular payments under the guise of settling disputes with your loan servicer. However, what actually happens is that they never make any payments, causing your loans to default. 

If your loan defaults, the legal firm claims you can’t make your payments. Then, they attempt to settle with your lender using this false information. 

You might have to pay thousands of dollars in legal expenses if you try to settle your student debt this way. Additionally, you’ll waste a lot of time that you could have used to pay off your debts wisely and legally.

2. Student Loan Cancellation Scam 

There’s no such thing as quick student loan cancellation. Therefore, you’re probably dealing with fraud if a debt relief company calls you and promises to eliminate your debt quickly.

Scammers might assert that, for a fee, you may entirely wipe away your debt if you attended a specific closed-down college. Therefore, you shouldn’t hire a firm to try to get your debt eliminated, even though there are situations when this is doable.

For instance, the federal government may provide student loan debt discharge under certain conditions, such as death, disability, and the closure of your institution.

3. The Consolidation Scam 

Consolidating your student loans can make sense in some situations. However, you can do that for free if you have federal loans on the Federal Student Aid website. 

There are further loan consolidation alternatives if you have a combination of private or federal loans or only private student loans

Consolidating services, often known as processing fees, are frequently offered for a cost by scam companies. Avoid paying for services you could perform on your own for nothing. Steer clear of these fee-based frauds.

Know how your plans for paying off your student loans will be impacted by consolidation. Before you consolidate, a reliable provider will ensure you know the terms.

For instance, it’s crucial to understand that consolidating student loans may cause your qualifying payments to be reset if you pursue student loan forgiveness.

4. The Advance Fee Scam 

The government provides borrowers with various free services. But scammers usually offer to be able to negotiate lower interest rates or better loan terms. 

However, they’ll only offer you this “help” if you’re ready to pay a small upfront charge. And the “small fee” isn’t really small. 

Federal and private student loans may occasionally have fees attached. However, remember that the problem isn’t the fee; they require you to pay upfront before they offer their services. 

How The Loan Repayment Works

The way student loan repayment is meant to operate isn’t like that. For instance, origination fees on federal loans are there. But they are included in the overall loan amount rather than being charged separately up front. 

You will also be charged a fee if you don’t make on-time payments. Disbursement or origination or fees are frequently associated with private loans. 

But once more, the amount of the loan itself is increased by this cost. So, in general, use caution whenever someone tries to collect payment in advance for a service associated with using federal services.

5. Student Loan Forgiveness Scams 

You can find lots of trendy topics on student loan forgiveness. So it’s no wonder scammers would try to take advantage of unwary borrowers by promising them simple and rapid loan forgiveness.

Depending on your situation, place of work, career path, and other considerations, there are numerous ways to be eligible for student loan forgiveness. However, none of those loan forgiveness plans are simple or quick.

For example, in the PSLF program, you must make qualifying loan payments for ten years before applying. Other alternatives for loan forgiveness could take 20 to 25 years. 

The procedure of loan forgiveness is not quick or straightforward. And any company that asserts the contrary is probably a scammer.

Scammers try to appear as legitimate as they can in their advertisements, commercials, and websites. Before giving any of these businesses your money, research these companies making the claims.

Red Flags Of Student Loan Forgiveness Scams 

Below are some indicators that a debt relief firm is out to scam you:

1. They Say They Are Connected To A Government Agency 

Some debt service companies may cooperate with lenders, servicers, the Education Department, and other governmental organizations. However, some merely pass as authentic using fake websites and nearly identical logos. 

The Education Department lists the private collection firms and loan servicers it uses. The company that contacts you might be a scammer if it isn’t on one of these listings.

If a company contacts you claiming to represent the government or your loan servicer, get in touch with your loan servicer or determine whether the assertion is true. 

On the Department of Education website, you’ll see a list of the debt relief companies that the FTC has filed complaints against.

2. The Scammers Want Your FSA ID or Power Of Attorney 

A.A. legit company may require your personal information to help you with your student loans. However, don’t do it when a debt relief company asks for your FSA ID password or signs a power of attorney agreement. It’s a scam! 

When you do that, you give the company permission to legally change your student loan agreement, including new payment arrangements. 

Also, your loan servicer will still hold you responsible for any late penalties or interest incurred if a debt relief company collects money to pay your student loans but fails to do so.

3. Showing Fake Education Department Credentials. 

Scammers can easily steal the images and trademarks of legitimate federal agencies. As a result, you can receive emails or alerts that appear to be from your student loan servicer but contain errors, incomplete information, or promotions for short-term deals.

Do research before responding if a company contacts you claiming to be from the U.S. Education Department or a loan servicer. You can always get in touch with your loan servicer directly to verify the integrity of emails.

Don’t rely on a letter or email you get promising to consolidate your loans or change your repayment to a more manageable amount. Instead, take action on your own through the federal government website.

How to Respond If You’ve Fallen for Student Loan Forgiveness Scams

student loan forgiveness scams

There are steps you may take if you’ve already fallen victim to a scammer to:

  • recover your money perhaps, 
  • report the company, and 
  • safeguard yourself from further losses. 

1. Speak With Your Bank Or Credit Card Provider 

Contact your card issuer or bank immediately if you’ve provided a business with your credit card number or bank details. To stop the transaction from happening, they might be able to cancel the charges or freeze your account.

2. Get In Touch With Your Loan Servicer

Contact your loan servicer to have any third-party authorization forms or powers of attorney you signed canceled.

3. Change Your FSA ID

Change your FSA ID immediately by visiting the FSA website and updating your login credentials. If you discover that you have already been locked out, get in touch with the Federal Student Aid Information Center immediately.

4. Complain To The FTC and The CFPB

Complain to the Federal Trade Commission and the Consumer Financial Protection Bureau after you have taken the necessary precautions to safeguard yourself. The FTC and CFPB both have online complaint forms that you can use to file a claim. 

You won’t be able to recuperate your losses. There is hope, though, as the FTC has successfully sued scam companies and compensated scam victims.

5. Put A Hold On Your Credit Report 

Putting a credit freeze on your file can prevent identity thieves from opening new accounts in your name. The three major credit bureaus— Experian, Equifax, and TransUnion—allow you to freeze your credit for free online.

Is There A Company You Can Trust To Assist You? 

Some reputable businesses and organizations can assist you with your student loan debt. For example, they can examine various federal and state repayment and forgiveness options to determine your eligibility. 

You could save time and money by using their advice and resources.

However, remember that what a debt relief company can do for you for a fee, you can do it for free through the Department of Education or your loan servicer. 

Scammers Capitalize on Political Discussions About Student Loans

student loan forgiveness scams

As said earlier, It’s a scam if a company asks for cash upfront to handle your debt because it’s against the law for debt relief companies to do so. ​

These scammers capitalize on the political and public discussion surrounding student loan rules by claiming that “new laws” will help borrowers like you. They can also urge you to act quickly before a program is terminated.

The scam companies might just take your money and run if you do. However, some scammers carry on the scam, take control of your loan, and receive your monthly payments. But they retain most or all of the money rather than using it to reduce your debt. 

So if you can’t take care of your student loans yourself, talk to a student loan expert. 

Student Loan Forgiveness Scams: How To Seek Loan Counselling 

You’re eligible for legitimate relief and loan counseling if you have federal or private student loans. You can find information on loan counseling in the FSA Handbook. Alternatively, contact the FSA for PLUS Credit, exit, and entrance counseling.

You can also consider refinancing your private loans to minimize your interest and monthly payments. Use a student loan refinancing calculator to estimate your potential new monthly payments. 

Lower interest rates and monthly payments are significant benefits, but you should be cautious about refinancing your federal loans with a private lender. That’s because you might lose access to income-driven repayment plans.

Be Proactive; Don’t Wait Until It’s Too Late.

To avoid student loan forgiveness scams, you need to know what attracts these scammers to borrowers. Debt relief scammers target those afraid or anxious about student loan relief to stay in business.

One of the valuable things you can do if you’re feeling overwhelmed is to be proactive. The quickest way to get help with your student loan repayments is to call your loan servicer immediately. 

When it comes to getting your student loan payments under control, your servicer can help you without turning to a third party.

Your present servicer may not have a program that suits your needs. Still, the sooner you find out that, the sooner you can start looking for viable alternatives to get out of debt. 

Initiating the process and completing your research increases your chances of finding an honest loan debt relief company. It’s better than waiting for someone to approach you. There is a good chance that you may come across a program to help you with your present financial problems.


Student loan forgiveness scams rely on the borrower’s ignorance of how their debts and loan forgiveness programs operate. Be wary of emails, messages, or phone calls that make outrageous claims about their ability to reduce your monthly payments or get loans forgiven. 

These are typically signs of student loan forgiveness scams or other unethical activities. To prevent a scammer’s trap, speak with your loan servicer immediately if you have any doubts. Constantly conduct sufficient research on the course you choose with your student loans. If you’re aware of your student loans and repayment options, it’ll be difficult to get scammed.