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How to spot student loan scams

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As long as there are student loans, there will be student loan scams. Because student loan debt can feel like a never-ending burden, borrowers are often prime targets for scammers promising easy relief. However, there are a few telltale signs of a scam; start with these tips to avoid falling victim.

5 common student loan scams

The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) have sued many dishonest student loan debt relief companies. This doesn’t mean that every company offering student loan relief services is a bad actor, but it’s important to know the warning signs.

1. Demanding upfront or monthly fees

There’s nothing wrong with paying for a service that takes care of something you don’t want to handle on your own. Many people pay others to settle their debts, repair their credit or file their taxes instead of going with the DIY approach. But if a company tries to charge you advance fees before it actually consolidates your loans, settles your debt or lowers your payments, that’s illegal.

There’s nothing a debt relief company can do for you that you can’t do for yourself. With or without professional help, you have the right to:

  • Contact your loan servicer.
  • Try to change your repayment plan.
  • See if you qualify for loan forgiveness.
  • Discuss options to get your loans out of default.

Upfront fees, especially before you receive a service that you could realistically manage on your own, may be a sign of a scam. The U.S. Department of Education provides a free Loan Simulator to help you discover your options when it comes to federal student loans. You can use the website to review repayment strategies (including potentially lower payments), learn about loan forgiveness and understand your choices if you’re having trouble making payments.

2. Requesting FSA ID password or signing a power of attorney

A legitimate company may need some of your personal information to help you with your student loans. But if a student loan relief company requests your Federal Student Aid ID (FSA ID) password or asks you to sign a power of attorney agreement, it’s a red flag.

With your FSA ID or a power of attorney, you’re giving a company permission to legally make changes to your student loan agreement — including new payment arrangements. It takes you out of the driver’s seat and puts someone else in control of your account. Worse yet, if a debt relief company collects money to pay your student loans but then doesn’t keep its word, you’ll still be on the hook with your student loan servicer for those payments, plus any late fees or interest you owe.

Your FSA ID password is private and should remain that way. It’s also best to avoid signing a power of attorney that gives someone else the power to act on your behalf. If you’ve already signed a POA or shared your FSA ID, reach out to your student loan servicer to revoke third-party authorization agreements on your account. You can log into your account with Federal Student Aid to change your FSA ID or password.

3. Promising instant loan forgiveness

There are legitimate federal and state programs that offer to reduce or forgive student loans for certain borrowers. Public Service Loan Forgiveness is one example. But the truth is that it takes eligible borrowers years to qualify for most government student loan forgiveness programs.

A student loan relief company that offers immediate student loan forgiveness or is overly enthusiastic about your chances of qualifying for such programs may be trying to take advantage of you. You should be especially concerned about big promises if they come from a salesperson who is pressuring you to sign up for a service or provide your payment information, or if you receive a call about forgiveness for private student loans.

You can review the different types of student loan forgiveness, cancellation and discharge available on the Federal Student Aid website. You can also contact your loan servicer for more information and to see if you qualify for a specific program.

4. Guarantees credit repair

If you’ve fallen behind on student loan payments and it’s taken a toll on your credit report, there are some reputable companies that will help you work on repairing your credit. But companies that promise to get bad marks removed from your credit report but don’t say how should give you some pause.

Companies cannot remove a debt from your credit report that you legally owe. If a company reaches out to promise this, it’s a major red flag.

5. Showing fake Department of Education credentials

It’s easy for scammers to steal the likeness and logos of official federal departments. You might get emails or notices that seem like they’re from your student loan servicer but contain typos, inaccurate information or advertisements for limited-time programs.

If a company reaches out claiming that it is from the Department of Education or a loan servicer, do some research before responding. You can always reach out to your loan servicer directly to assess the legitimacy of email communications. If you’re interested in consolidating your loans or changing repayment to a more affordable amount, take action yourself through the federal government website, not through a letter or email you get offering it.

How to report a student loan scam

If you are contacted by a scammer, it’s important to report the incident. Even if no money leaves your pocket, alerting the appropriate authorities can protect other student loan borrowers from becoming a scam artist’s next victim.

You can report a scam to

It’s also important to report the scam to your student loan servicer. This is especially true if the scammer is impersonating the servicer.

What to do if you’ve been scammed

Finding out you’ve been scammed is hard, especially if you’ve already paid money to the scammer. But you’ll need to act fast — your personal information is at risk. Here’s what to do next:

  1. Change your FSA ID password. Log into your account and change your credentials as soon as possible. Do not share your new password with anyone.
  2. Contact your loan servicer. Tell your servicer to remove any power of attorney or third-party authorization you’ve given to a scammer. Then request to see if anything malicious has been done on your account.
  3. Reach out to your bank. If you’ve handed over credit card information or made a payment, start a claim to cancel that payment. You should also freeze your card and request a new one. Your bank can advise you on any next steps for recouping the money you lost.

If you need help with your student loans, be sure to thoroughly vet any company you’re considering. Student loan scams can cause lasting financial problems and sometimes credit damage, too. It’s critical to learn how to avoid student loan scams yourself.

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Written by
Dori Zinn
Contributing writer
Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy.
Edited by
Student loans editor