Forgiveness programs involve a lot of technical terms. If you check any of them, you will be exhausted with the volume of information regarding eligibility, application, etc. Such complexity of the forgiveness programs creates a favorable environment for scammers. If borrowers do not understand the process, they make fake claims, get money, and disappear. The best method to fight student debt forgiveness scams is prevention through knowledge. If you get highly informed about programs, no one can mislead you.
This guide introduces you to 17 ways to detect these scams and avoid them.
Why Student Debt Forgiveness Scams Exist?
Paying off student loan debt has become a significant issue as millions of borrowers struggle with repayment. Many legitimate companies help borrowers understand their finances and find an effective debt resolution strategy. In addition, they can recommend borrowers to the most suitable repayment plans or forgiveness programs that fit their qualifications.
However, there also exist companies that take advantage of desperate borrowers. They claim a fee to enroll borrowers to free programs or trick them into sharing personal details with the hope of a debtless future. On the one hand, even a small fee benefits these scammers because of the volume of struggling borrowers. On the other hand, borrowers do not care if they are tricked because they pay a small amount in some cases. Additionally, the government does not heavily regulate the student loan relief industry, which creates a perfect environment for these scammers.
However, some organizations are fighting these scammers, which we will provide contact points in the following sections.
One of the student debt forgiveness scams is about consolidation. Student loan consolidation is a program that combines different student loans into one. It is possible to apply for federal and private loan consolidation. The main advantage of this program is that you end up dealing with a single loan rather than multiple.
Usually, loan consolidation does not lower interest rates. New consolidated loans get an interest rate which is the weighted average of your existing loans’ rates. So, you do not save money. However, if the consolidation extends your repayment period, then your monthly repayment amount can decrease. Yet, you do not save money in the long run.
Some companies claim that you can save money if you allow them to consolidate the loans. However, what they do not mention is the high fees they will require for the process. Hence, you will pay a lot of money to allegedly “save money.” Hence, avoid falling for these student debt forgiveness scams.
Student Loan Forgiveness
Student Loan Forgiveness allows borrowers to eliminate debt without paying a penny. The federal government provides several forgiveness programs. They are centralized in the Student Aid platform. You can get information about each program and even apply through the platform.
There is no other third party who can eliminate your debt. Some companies claim that they can get forgiveness for you in return for a small upfront fee. You might think that a small fee is not considerable compared to the forgiveness amount. However, as mentioned, except in official ways, no other company can grant you forgiveness. Companies like Forget Student Debt can provide consultation services to help you decide the best forgiveness program. Yet, you should still apply through the legal ways.
Taxation of Student Loans
This type of student debt forgiveness scams is related to taxes. Someone can call you claiming that you owe federal tax for the loan or forgiveness amount. In most cases, these people threaten the borrowers and tell them that they will be arrested if they do not make immediate payment. Besides, they can ask for personal information on the phone.
Keep in mind that you can check the taxation of your forgiveness or loans online. You might be worried that you owe the taxes, and it will end up with punishment if you ignore the call. Hence, we share with you several ways to detect such scams.
Some law firms perform student debt forgiveness scams. For example, you might get a call from a lawyer who claims that they can get you out of debt. You only need to pay them some money so that they start taking care of your loans.
In some cases, they even ask you to make monthly payments to them so that they will negotiate with the lenders. Later they take all the money and do not make any payments to the lenders. Once you default, they tell lenders that you cannot make payments and want to negotiate. Trying to settle with the lender through legal ways can cost you a fortune. After all, lawsuits are not cheap. Besides, you wasted so much money which you could spend for repayment. In other cases, they will just disappear with all the money you paid.
It is unfortunate for law firms to perform such scams. Unfortunately, however, so many struggling borrowers exist that they fall for such student debt forgiveness scams.
1. Fee is Involved
Keep in mind that federal student loan consolidation is free, and there is no fee involved. You can even apply for consolidation online through the official Student Aid platform. So if any company demands money to consolidate your federal loans, avoid them.
2. Affiliation with the Education Department
Some companies claim that they are in Affiliation with the Education Department to show how ‘legit’ they are. However, there is no private company that the Education Department is affiliated with regarding consolidation. If you see such claims, do not respond to these student debt forgiveness scams.
3. Save Money with Consolidation
As mentioned, consolidated loans have a weighted average of interest rates of existing loans. Hence, there is no way it decreases your interest rate and helps you save money. On the other hand, for private loans, student loan refinancing can help you save money if you find a lower interest loan and use the money to get rid of existing debt. Otherwise, your monthly payments might decrease, but the total cost of debt cannot be lower in the long run.
4. Call First
Internal Revenue Services first contact the individuals by mail and then call. If you have not received any other notification but only a call, it is highly likely that the call is a scam. Additionally, do not share your personal details on the phone.
5. Immediate Payment
The IRS never asks for immediate payment, at least not on the phone. There are legal ways of collecting payments. Hence direct bank transfers or wire transfers are not possible. If you get such a request, ignore it and hang up.
The IRS never threatens people for owing tax. If the person threatens you with deportation or arrest, it is definitely a scam.
7. We can Forgive Your Debt.
No private establishment can forgive your debt. Only the federal government can evaluate your case through the Education Department and decide if you qualify for a forgiveness or discharge program. If you have private student loans, your private lenders can provide forgiveness, such as disability discharge. Yet, even such an option is highly impossible.
8. We have Affiliation
Some companies would claim that they are working with professionals and have an essential network with loan servicers or lenders. In this way, they ‘can’ get forgiveness for you. All these claims are signs of student debt forgiveness scams. Do not contact these companies.
9. An Upfront Fee
Federal student loan forgiveness programs do not require an upfront fee, regardless of the amount. If someone requires you to make payment for forgiveness, avoid further communication. Even better, file a report for a scam to the Consumer Financial Protection Bureau.
10. Instant Forgiveness
Even if you apply for a forgiveness program, it will not erase your debt immediately. It takes a lot of time to become eligible for the forgiveness programs. For example, Public Service Loan Forgiveness requires a minimum of 10 years of service before you become qualified for the debt cancellation. No service provider can negotiate these terms with the Education Department to speed up the process. So, do not fall for the instant forgiveness claims.
11. Request for FSA Password
FSA password is required for the Federal Student Aid platform. FSA ID allows borrowers to sign documents. These digital signatures are as legally binding as handwritten ones. So, if someone has access to your FSA ID, they can make any changes they want with your signature. If any third party is asking for an FSA username or password, hang up the call and report them.
General Ways to Detect Scams
We have introduced some ways to detect student loan forgiveness scams based on the type of scam. However, there also exist general ways to determine a scam, regardless if it is for forgiveness or not.
12. Stay Up-to-Date
It is advised to follow the news and check the Student Aid website regularly to identify changes. Some student loan forgiveness programs might get updated, or new regulations can be introduced. Even now, there are heated discussions on Biden’s loan forgiveness. However, there is still no exact decision regarding this forgiveness.
Scammers can use non-existing options, such as Biden’s loan forgiveness program, to trick the borrowers. If you follow the news, you know that this option is not available, so it is a scam.
13. Be Skeptic
Some scammers can find personal information about you and use it during communication. For example, they might know your name, address, the total debt amount, etc. When you see such details, you might think that the calling person is legit. However, there have been a lot of cases when personal details were stolen. Hence, just because they know your name or debt amount, do not trust them.
14. Check Email
If you receive an email, you should always check for signs of student debt forgiveness scams. One of the common signs is a non-official email address. Usually, official emails end with “.gov.” Besides, email should have a proper subject, signature, and structure. You should also check the content. If there is any request to click on a link, or a request to make payment, do not click.
15. Look for Grammatical Errors
This might sound funny, but official employees or communications do not involve grammatical errors. Any advertising you see online or email you receive should not involve unusual capitalization, weird sentence structures, or incomplete words. The Education Department or your loan servicers would not make such mistakes. These can be helpful to detect student debt forgiveness scams.
16. Do Not Share Personal Information.
You can be asked to provide personal information for verification. If it is an email, you will be required to log in to a platform and provide this information. However, scammers can require you to click on weird-looking links or reply with your details. Over the phone, make sure you share details only for verification. For example, never share your bank card information or passwords.
17. Know Your Free Options
Many forgiveness programs and federal loan-related activities are free. If anyone requests you to make a payment, even a small amount, for these actions, avoid further contact. You do not need to pay for:
- Consolidating your federal debt
- Enroll in a different loan repayment program
- Apply for student debt cancellation options
- Getting rid of the default
- Getting forbearance or deferment status
If you feel lost and do not know if the claim is true, you can get more information from the Student Aid platform or call 1-800-557-7394. For tax-related issues, you can call the IRS or visit the IRS website. Besides, it is possible to report such student debt forgiveness scams to the Treasury Inspector General for Tax Administration or Federal Trade Commission. There is also an email address to contact for such requests- email@example.com.
If you need help with student loan forgiveness, you can again check the Student Aid platform or call us for expert help. For any complaints, you can contact the Consumer Financial Protection Bureau.
What if I am a Victim of a Loan Scam?
If you respond to the scammer, do not hurry to panic. First, if you did not share your details, it is still okay. However, to avoid any type of harmful consequences, you need to take some steps. First, as mentioned before, you can file a complaint so that no one else becomes a victim.
Besides, it is advisable to change your FSA- Federal Student Aid- password as soon as possible. You can also contact your lender or loan servicer to inform them and get help. Finally, if you agree to make payments, you might contact the bank and require them to stop paying any debt forgiveness program.
What are the Legit Ways of Forgiveness?
Let us remind you that the best way of avoiding student debt forgiveness scams is preventing them. Plus, the most effective way of prevention is knowledge. None can trick you if you have enough background on different forgiveness programs, their eligibility, and application processes.
You can collect information on desired forgiveness programs through the Student Aid website or by checking our blogs. There exist a variety of forgiveness programs. For example, you can apply for Public Service Loan Forgiveness which applies to borrowers in public jobs. If you teach, you can apply Teacher Loan Forgiveness. In case your school tricked you, Borrowers’ Defense to Repayment can be helpful.
Besides forgiveness and discharge options, repayment plans can also help. The government offers several repayment plans. You can choose the one that suits your qualifications the best. For example, if you struggle with debt repayment, Income-driven plans can lower your payments considerably.
The Benefits of Getting an Expert Help
You can fight with debt scammers alone, or you can get expert help to avoid them from the very beginning. The student loan forgiveness options are a lot, and a high volume of information surrounds them. Unfortunately, it is not easy to understand these opportunities, which creates a perfect environment for student debt forgiveness scams. If you get expert help, you will be informed about the programs. In this way, you will avoid loan scams. Debt experts have the necessary financial knowledge. Besides, they have worked with hundreds of borrowers sharing the same concerns as you do. Hence, when you contact these specialists, they can immediately analyze your finances and determine the best debt resolution strategy for your student loans.