6 ways to spot student loan forgiveness scams

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Scams about during difficult financial times. Here’s how to avoid falling prey to student loan forgiveness scams. (iStock)

It’s possible that the confusion surrounding student loan waivers, deferment, forbearance, and the impending end of the pandemic-driven payment pause has caused student loan forgiveness scams to power up.  

In 2021, the Federal Trade Commission (FTC) fined student loan scammers more than $1 million and sent refunds to thousands of victims. One such scam involved nearly 20,000 victims, so it’s clear that it’s not always easy to spot fraud. 

And with the recent announcement of $10,000 to $20,000 of forgiveness for federal student loan borrowers, it’s even more important to be aware of scams. Some scammers may capitalize on the announcement and give false information to lead you astray.

Private student loans can’t be forgiven, but it may be possible to lower your interest rate or monthly payment by refinancing them. Credible makes it easy to compare your prequalified student loan refinance rates in minutes.

Biden’s student loan forgiveness plan

On Aug. 24, President Joe Biden announced a new student loan forgiveness plan that will cancel $20,000 in student loans if the borrower took out a Pell Grant for college and $10,000 for non-Pell Grant recipients. The forgiveness is only available to federal student loan borrowers with annual incomes below $125,000 ($250,000 for couples who file taxes jointly).

Considering official student loan debt relief is now on the horizon, borrowers need to be vigilant when receiving any type of communication from a company claiming to be affiliated with the U.S. Department of Education or offering additional options not officially endorsed.

6 ways to spot student loan scammers 

"Debt-relief companies" that ask for personal information, demand payment up front, make unrealistic promises, or contact you directly are all red flags to watch for. Knowing what to look for may help you avoid student loan scams.

Here are six signs that a "debt-relief company" is really just trying to scam you:

1. They promise immediate and total student loan relief

Federal student loan forgiveness does exist, but it’s only available by dealing with your loan servicer and following the Department of Education’s rules for qualifying. And it typically takes time — 120 months or longer, depending on the type of forgiveness program you qualify for. 

The broad student loan forgiveness announced in August will only come from the U.S. Department of Education. You’ll need to meet income qualifications to get it.

Any company that promises to discharge your loans immediately is likely a scammer trying to mislead you. Remember, if it sounds too good to be true, it likely isn’t true.

2. They want you to pay up front for services

Not all companies offering student loan forgiveness or consolidation are scamming you — although even legitimate companies are offering to do something for you that you can easily do for yourself. But if a company asks for payment up front, before doing any work on your behalf, it’s likely a scam. It’s actually illegal for companies to charge before providing you a service. 


3. They ask for personal identifying information

If a company, posing as a debt relief company or government agency, contacts you asking for information like your Federal Student Aid (FSA) ID username, password or PIN, or Social Security number, it’s likely a scam. The FTC says you should never share your FSA ID — criminals can use it to steal your identity. 

4. They claim to be affiliated with a government agency

Some debt service providers may actually work with lenders, servicers, the U.S. Department of Education, and other government agencies. But some simply pose as legitimate with almost identical logos and fake websites. The ED maintains a list of its loan servicers and private collection agencies. If the company that contacts you isn't on one of these lists, it could be a scammer.

If a company contacts you claiming to represent your loan servicer or the government, reach out to your loan servicer to find out if the claim is legitimate. You can find a list of debt-relief companies that the FTC has taken action against on the Department of Education’s website.

Additionally, watch out for common scam signs such as:

  • An email that looks above board but is sent from a personal email address, rather than a government agency
  • Spelling errors and grammar mistakes in the body of the email
  • Logos or seals that resemble official government emblems, but aren’t quite right

5. They use high-pressure sales tactics

Scammers often push for an immediate response to a "too good to be true" offer. They don’t want to give you time to think. By contrast, a government agency program representative would want you to fully understand what you’re agreeing to. 


6. They want you to give them power of attorney

Some debt-relief scammers have asked borrowers to sign a power of attorney document that will allow the company to deal with the borrower’s loan servicer, according to the CFPB. But a power of attorney is a third-party authorization that can be misused to take over important financial decisions for you. Only give it to someone you know personally and trust completely. 

If you have student loan debt at high interest rates, refinancing into a lower-rate loan could be a good financial decision — especially if your credit has improved since you first took out the loans. With Credible, you can easily compare student loan refinance rates without affecting your credit.

What to do if you’ve been contacted by a student loan forgiveness scammer

Although you should contact your loan servicer first, you might also reach out to one of the agencies below if you think a student loan forgiveness scammer has targeted you: 

  • Start by reporting a suspected scam to your state consumer protection office.
  • Submit a complaint with the Consumer Financial Protection Bureau. The CFPB will forward your complaint to the company, if they’re legitimate, or to another government agency if there’s one that can better assist you.
  • The FTC is the main agency to report to if you’ve been contacted by a scam. You can report the scam to the FTC online, or by phone at 1-877-382-4357 (9 a.m. to 8 p.m. Eastern time).

What to do if you’ve been a victim of a student loan forgiveness scam

If you think you’re the victim of a scam, don’t panic, but act fast and follow these steps:

  • Contact your loan servicer or lender immediately. Log in to your Federal Student Aid account as soon as possible if you have federal student loans. If you have private loans, call your bank, credit union, or online lender right away to put a hold on your account or flag it for unusual account activity.
  • File a report with the authorities. You can use the information above to reach out to the FTC, CFPB, and your state authorities. You can also submit a complaint with the FSA if you have federal student loans.
  • Monitor your credit report. Scammers may be interested in more than just your money. They may want to commit identity theft and steal all your personal information. Pull your credit reports at AnnualCreditReport.com, check for any unrecognized activity, and place a fraud alert or credit freeze on your file. Each of the three credit-reporting agencies — Equifax, Experian, and TransUnion  — offers one free credit report each year.
  • Change your passwords for FSA ID and other lender accounts. If a company has requested your Federal Student Aid ID, or you’ve fallen victim and given out this information, log in and change your FSA ID and PIN as soon as you realize you’ve been scammed. In the future, don’t share your new FSA ID and PIN with anyone. If you have an online bank account or other lender accounts, it’s a good idea to also change your login information, just to be safe.

How to get student loan forgiveness and loan counseling

Legitimate relief and loan counseling is available to both federal and private student loan borrowers. Find out about the types of loan forgiveness programs that might be available to you. 

The FSA Handbook provides information about loan counseling. Or you can reach out to the FSA for PLUS Credit counseling, exit, and entrance counseling. 

You might also consider refinancing your private student loans, which can lower your interest rate and monthly payments. Use an online student loan refinancing calculator to get a sense of what your new monthly payments could be. Although lower monthly payments and interest rates are great advantages, think carefully before refinancing federal student loans with a private lender because you may no longer be eligible for income-driven repayment (IDR) plans.

If you’re ready to refinance your student loans, consider starting the process with Credible, where you can see your prequalified rates from multiple lenders in minutes.