Student debt poses a significant challenge in America, with the nation collectively owing over $1.5 trillion in outstanding student loans. This burden has become crippling for millions, exacerbated by low wages and record-high unemployment in 2020. While some of these challenges are pandemic-related, they remain a stark reality for many individuals. In response, some politicians advocate for student loan forgiveness as part of their platforms. Regardless of your stance on this issue, the student debt crisis continues to dominate headlines nationwide.
If you’re grappling with substantial student debt, you’ve likely explored options for relief. Consolidation, refinancing, and debt restructuring offer potential pathways to alleviate financial strain. However, amidst legitimate avenues for assistance, there exists a plethora of shady individuals, predatory companies, and outright scammers seeking to exploit the financially vulnerable. If you’re considering student debt relief, it’s essential to remain vigilant. And as the headline emphasizes, never pay an upfront fee for student debt relief.
How to Identify a Scam
Distinguishing between a scam and a genuine debt relief offer can be challenging, but there are subtle signs to watch for. Scam companies often employ aggressive advertising tactics on platforms like Facebook or Google ads, and may even initiate direct contact through unsolicited messages or phone calls. As a general rule, exercise caution with any company that reaches out to you without your prior solicitation.
Some scammers may promise to handle all paperwork on your behalf, only to later charge a fee for this service—often undisclosed upfront. However, it’s important to note that completing such paperwork is something you can do independently, at no cost. You have the option to contact your private lender or the U.S. Department of Education to inquire about available repayment programs. Similarly, if your loans are government-backed, you can explore resources on the Federal Student Aid website for further assistance.
These scam companies may willingly charge you a fee to handle paperwork, but subsequently vanish, leaving you with inadequate documentation and no guidance on how to proceed. Ultimately, they fail to provide any meaningful debt relief.
Avoid Upfront Fees
As reiterated, no legitimate student loan debt relief company will request an upfront fee. They may employ various tactics to phrase this demand, such as insisting on payment of a certain percentage of the loan (e.g., 1%) upfront, coercing you into monthly fees or a single flat-rate payment (often amounting to several thousand dollars), or suggesting that you take out a separate loan to cover their fee. However, it’s crucial to avoid complying with any of these requests.
In fact, it’s illegal for student loan debt relief companies to collect fees before fulfilling their promised services, which typically involve reducing or settling your loan amounts.
If It Seems Too Good to Be True, It Likely Is
While the idea of having your student debt entirely forgiven or canceled may seem enticing, it’s important to be realistic. Legitimate debt relief programs do not make such promises. Instead, they typically aim to negotiate on your behalf, seeking lower interest charges or more manageable payment schedules. While they may succeed in reducing the principal amount to some extent, it’s important not to rely too heavily on this possibility.
Beware of shady companies that assert they have a unique agreement with the Department of Education, enabling them to outright forgive student loans. This claim is unequivocally false, as no such arrangement exists.
Safeguard Your Privacy
If you possess Federal Student Aid, you’re equipped with an FSA ID and password. Safeguarding this information is paramount. If you inadvertently disclose it to a scammer, they can swiftly exploit it to your detriment. Your FSA ID and password carry the same legal weight as your handwritten signature—though they’re merely comprised of letters and numbers, making them exceedingly simple to replicate. Additionally, if scammers request your social security number, it serves as another warning sign, as they have no legitimate need for it.
Dealing with Being Scammed
If you suspect you’ve fallen victim to one of these scams or have encountered a company you believe to be unscrupulous, taking action is crucial. Report the incident to the Federal Trade Commission, the Consumer Financial Protection Bureau, and your state’s Attorney General office.
Additionally, reach out to your lender to alert them to the potential fraud on your account, especially if you disclosed your FSA ID and password. It’s also advisable to contact your financial institution, as they can implement fraud and identity theft alerts on your bank accounts to deter further unauthorized activity.
If you’ve already paid an upfront fee for student debt relief and now find yourself empty-handed, the outlook may not be promising. It’s likely too late to recover the funds. However, there’s a slim chance that if the scammer is apprehended and brought to justice, restitution could be pursued. While this process may be lengthy, any information you can provide authorities about the scammer could ultimately benefit you and other victims.