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How to avoid student loan forgiveness scams

Student loan forgiveness scams are when criminals pretend to represent a legitimate student loan relief company and promise to write off your student loan for payment. Student loan scams can be difficult to spot because of the sophisticated techniques scammers use. What are the warning signs, and how can you avoid student loan forgiveness scams? Read on to find out.

How to avoid student loan forgiveness scams

What are student loan forgiveness scams?

Student loan scams target people with education debt. Scammers may set up targeted ads or contact people directly, promising quick and easy student loan forgiveness (i.e., when a borrower no longer has to repay a part or all of their student loan).

Student loan scammers typically pretend to be from a legitimate company specializing in student loan relief. They often ask for a payment upfront and may ask for your personal or financial information.

Over the past year, there’s been some public confusion around student loan relief and who’s eligible for it. In 2022, President Biden announced a student loan forgiveness plan to eliminate student loan debt and make college more affordable. The program’s goal was to cancel an estimated $400 billion in student loan debt for an estimated 40 million Americans. However, Biden’s plan is now on hold and could be rejected by the Supreme Court.

Scammers have been using the lack of clarity around this student loan forgiveness program to target struggling borrowers. That’s why it’s particularly important to remain vigilant and know the common signs of a potential scam.

The warning signs of student loan forgiveness scams

The best way to avoid student loan forgiveness scams is by familiarizing yourself with the most common warning signs. Knowing what to look out for will help you put a stop to a potential scam before any harm is done. Here’s how you can tell if you’re dealing with fraudulent student loan advisors.

They request an upfront payment

Student loan forgiveness scammers are looking to make money quickly and will likely ask for a payment upfront. Be wary if you’ve received a message from an agency that’s promising loan relief for an upfront fee. The Education Department will never impose an upfront fee to apply for student loan forgiveness or any other debt relief.

Promise immediate student loan relief

If a company promises immediate student loan relief, you’re probably dealing with a scammer. Scam artists will often make big promises and guarantee unrealistic results.

If you’ve received a phone call or an email from someone claiming they can get your student debt written off quickly and easily, it’s a major red flag. Federal student loan forgiveness scams typically require you to make qualified payments for years or prove that you work in a specific field (e.g., public service or teaching).

Ask for your SSN or other sensitive information

Scammers may ask for personal information like your SSN (Social Security number) or FSA ID password over the phone or by email. If someone claims to be a representative of student loan servicers and asks you to provide this information, it’s most likely a scam.

The U.S. Department of Education and its partner companies will never ask you to provide such sensitive information in this way. You may need to confirm your identity in other secure ways when logging in to your account (e.g., facial recognition or 2FA) on the official federal student aid website, but never over the phone or by email.

Use high-pressure sales tactics

A legitimate company will never force you to make a decision quickly. Scammers know that the more time you have to think, the more likely you are to research the available services and realize their offer sounds suspicious.

That’s why they often use high-pressure sales tactics to get you to share personal information or make a payment quickly. For example, they may say that they can only reduce your monthly payments or interest rates for a limited time or that the student loan forgiveness program has limited places.

Claim to be affiliated with a government agency

Student loan relief scammers may attempt to appear more credible by using logos from the U.S. Department of Education or the Treasury Department. They may choose official-sounding names and claim they’ve partnered with the Department of Education.

However, the Department of Education doesn’t partner with agencies or authorize organizations to handle federal loan services outside your federal loan servicer. If a company is making such claims, it’s most likely fake.

Want you to sign a form giving them power of attorney

Companies claiming to specialize in federal student loans and loan relief may ask you to sign a written agreement that authorizes them to talk to your federal loan servicer on your behalf. This agreement means they can make decisions and change your loan account information.

If an agency wants you to sign a form giving them power of attorney, you’re most likely dealing with a scam artist. No legitimate company will ask you to do that.

How to avoid student loan forgiveness scams

You can avoid student loan forgiveness scams by remaining cautious and not rushing into making a decision or providing personal information. Here are the four ways to prevent student debt relief scams and keep your accounts safe:

  • Make sure you’re dealing with the U.S. Department of Education. If you’re planning to apply for student loan forgiveness, complete your application via the official StudentAid website. The U.S. Department of Education works only with contracted servicers. Always check that a servicer appears on the government’s list of contracted federal loan servicers before working with them.
  • Ignore aggressive phone calls, emails, or text messages. Student loan scammers might call, text, or email you about student loan repayments. If you receive suspicious, aggressive communication urgently asking you to opt in to the student loan forgiveness program, don’t respond. You should also consider reporting it to the U.S. Department of Education by submitting a complaint.
  • Don’t make payments until you’re sure it isn’t a scam. Applying for federal student loan forgiveness programs is free. If an agency you’re dealing with has asked you to pay for student debt relief upfront, don’t. Scammers may even claim that paying a fee will speed up your process or improve your odds of approval. Neither of these is true.
  • Don’t provide personal information. Beware of phishing or smishing attempts. Scammers may pretend to work for the Department of Education then try to make you supply information about your student loan account. Sometimes, these emails look surprisingly authentic, and you may be tempted to reply without hesitation. However, don’t rush into replying — contact the Department of Education directly via its official website instead.

What to do if you think you’ve been scammed

If you think you’ve been scammed by a fraudulent student loan repayment company, you can take a variety of actions to help mitigate the situation. It’s important to act quickly to minimize the damage to your financial situation and credit score.

  • File a report with the Federal Trade Commission and your state’s attorney general. Contact the FTC by phone or email using the contact information listed on the agency’s official website. The FTC will advise you on what to do next and how to get your money back. Make sure you also report the incident to your state’s attorney general.
  • Contact your loan servicer immediately. Call your loan servicer right away using the phone number listed on the company’s official website. A client service representative will be able to advise you about the next steps.
  • Contact your bank, credit union, or credit card company. Let your bank or credit card company know about the incident so it can place fraud alerts on your account and stop the scammers from making further transactions.
  • Change your passwords. If someone has gained your personal information or passwords, change your password for your FSA ID, bank or credit union, and student loan account as soon as possible. Use strong, long, unique passwords for each account to make them hard to guess.
  • Freeze your credit. It’s also a good idea to contact one of the three major credit bureaus (Equifax, Experian, or TransUnion) and ask them to freeze your credit. A credit freeze (or security freeze) stops scammers from opening any other accounts in your name without additional verification.
  • Report the incident to the FBI. You can also involve law enforcement so that they can prevent scammers from targeting other individuals in the future. You can file a complaint with the FBI’s Internet Crime Complaint Center.

How to get legitimate help with student loan repayment

If you’re struggling to make student loan payments, you can get help in several ways. As always, be cautious and only use official websites when applying for aid.

  • Contact your loan service provider to explore potential student loan forgiveness options.
  • Sign up for an income-based repayment plan for more manageable, reduced payments.
  • Consolidate your loans into a direct consolidation loan to extend your repayment term (up to 30 years).
  • Refinance your student loan — you may get a lower interest rate.
  • Get student loan debt advice and counseling through a trusted organization (like the National Foundation for Credit Counseling).