Some Student Loan Debt Relief Companies Want to Steal Your Money, Not Help You Save Money
Debt relief companies sell services that you do yourself for free, but sometimes steal your money outright
If you have continued your education, the odds are pretty good that you have had a student loan at one time or another. Whether you have just signed for your first student loan or if you are trying to pay off several, it can be tempting to jump on any opportunity that promises to wipe away some or all of your student debts. Scammers want you to forget that there is no easy way to wipe out your debt.
There's no Magic Bullet
No matter how you slice it, there's no magic bullet to wiping out your debt. Although you have many options when you have trouble paying your student loan debts on time, quick and easy debt relief doesn't exist. Whether it's a scammer trying to make a quick buck or a company with questionable intentions, quick debt relief ends up costing you more. If you're looking for true debt relief options, you need to have realistic expectations.
Reducing your debt for a fee
Companies that offers debt relief for your loans are everywhere, but they offer this debt relief for a fee. Debt relief for a fee isn't necessarily illegal since a company can charge you for a service that you could have performed on your own. The problem is that there are many programs and services out there that are available to help you at no cost.
Scammers know you want a quick and easy solution to your debt problems. A debt relief company that charges a fee becomes a scam when they charge a fee before providing the agreed upon service or they make false claims when promoting their services. Here are some examples of common ploys used by scammers and unscrupulous companies:
- Some companies require you to pay a fee, often called a loan modification fee, upfront in order to modify the terms of your loan to something more favorable. This may be accomplished through changing the interest rate, extending the loan term, and/or changing your interest rate from a fixed rate to a variable rate.
- Other companies may charge you for services that weren't done correctly or weren't even done at all.
- Companies may falsely claim to have a special relationship with the Department of Education that can supposedly help you reduce your debt. The Department of Education doesn't work this way.
- Scammers may ask you to make payments directly to the company instead of to the lender. Then your money disappears and you're left with missed payments.
Red Flags to a scam
Student loan modification and debt relief scams have some common signs. Red flags of a scam may include:
- Requesting upfront fees before actually performing any services;
- Claiming to be able to forgive debts or negotiate special deals for you;
- Claiming to be able to reduce your interest rates below what is reasonable;
- Asking you to sign a so-called "third-party authorization" or "power of attorney" document so they can negotiate with loan servicers and make decisions for you;
- Claiming to have a special relationship with the Department of Education;
- Failing to disclose that the company is not affiliated with the Department of Education;
- Claiming to be able to lower your payments or interest charges through loan consolidation; and
- Asking for your Federal Student Aid PIN, which is an identification number provided by the Department of Education that allows access to your federal student loan information.
Real Help Is Out There for federal student loans
Being able to pay off student loan debt is a real problem for many Americans, one that has been increasing for years. And the problem isn't always related to the amount of debt students carry. Sometimes student loan servicers don't do the work they are supposed to do, instead providing inconsistent loan information, losing paperwork, and charging surprise fees.
If you have a federal student loan, you can choose from several repayment plans that can lower your monthly payment based upon your income. These loans also include options for deferment (delaying repayment of both the principal balance and the interest on the loan), forbearance (delaying repayment of just the principal balance), and in some cases even actual forgiveness of the loan.
If you are employed by a government or not-for-profit organization, you may be able to receive loan forgiveness under the Public Service Loan Forgiveness (PSLF) Program. The PSLF Program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. There may be other situations in which you can receive loan forgiveness for federal student loans.
hope is not lost with private student loans
While private student loans don't offer the protections afforded by federal student loans all hope is not lost. You should contact your lender to ask about refinancing the loan or adjusting the payment schedule. Many companies will work with you to get you something that is more favorable, especially if you are running into trouble making the payment.
understand before you borrow
The best way to avoid running into problems paying your loan or problems with debt relief scams is to fully understand the terms of your student loan before you borrow the money. It's often too easy to accept whichever loans come your way and then run into trouble when the payments become due. All student loans have differences and you should understand those differences.