Some Student Loan borrowers have reported receiving phone calls, emails, letters, and/or texts offering them relief from their federal student loans. Student loan debt relief companies have also aggressively advertised on TV, online, in print, and through various other channels. In an effort to appear legitimate, some of these companies may even include your loan balance information in their communications. Always be sure to verify the source. If the communication didn’t come from ED or one of our partners, it should not be trusted.
How do I identify a student loan scam?
Here are some signs to help you identify a scam by a student loan debt relief company:
- They require you to pay up-front or monthly fees for help. It is illegal to charge an up-front fee for this type of service, so if a company requires a fee before they actually do anything, that’s a huge red flag—especially if they try to get your credit card number or bank account information. In some cases, they may even step in and ask you to pay them directly, promising to pay your servicer each month when your bill comes due. Free assistance is available through your federal loan servicer.
- They promise immediate and total loan forgiveness or cancellation. No one can promise immediate and total loan forgiveness or cancellation. Most government forgiveness programs require many years of qualifying payments and/or employment in certain fields before your loans can be forgiven. Also, student loan debt relief companies do not have the ability to negotiate with your federal loan servicer for a “special deal” under the federal student loan programs. Payment levels under income-driven payment plans are set by federal law.
- They ask for your FSA ID. ED or its partners will never ask you for your FSA ID password. Your FSA ID is used to sign legally binding documents electronically. It has the same legal status as a written signature. Do not give your FSA ID password to anyone or allow anyone to create an FSA ID for you. If a company has access to your FSA ID information, they can make changes to your account without your permission.
- They ask you to sign and submit a third-party authorization form or a power of attorney. These are written agreements giving the third party legal permission to talk directly to your federal loan servicer and make decisions on your behalf. Debt relief companies often want these authorizations so that they can change your account and contact information, so you don’t realize that they aren’t actually paying your monthly student loan bill.
- They claim that their offer is limited and encourage you to act immediately. Student loan debt relief companies often try to instill a sense of urgency by citing “new laws” or discontinuing programs as a way to encourage borrowers to contact them immediately. While there are some deadlines you need to meet in regards to your student loans—for instance, if you’re paying under an income-driven repayment plan, you need to recertify annually—our programs are limited only by the eligibility requirements.
- Their communications contain spelling and grammatical errors. While many of the communications sent out by these companies look very formal (for example, fold-and-tear letters with safety patterns), they often contain spelling and grammatical errors. If you notice unusual capitalization, improper grammar, or incomplete sentences in the communication you receive, that’s likely a red flag that the company is not affiliated with ED.
What do I do if I’ve already shared my information or paid one of these student loan debt relief companies?
You need to complete the following tasks: