4 Red Flags To Watch Out For With Student Loan Pay-off Offers
March 22, 2019If you’re dealing with student loan debt, I’m sure you already know that the total amount owed these days is over $1.5 trillion. Wouldn’t it be nice to be able to hit the reset button and just not have to pay that debt back? Or to at least get some type of relief, either in the form of a lower interest rate, or legitimately having the debt forgiven?
There are actually programs out there to help with that, but before you start taking advantage, it’s important to understand that there are some scams out there too. How do you know?
Here are the red flags to watch out for
Red flag #1: A promise to just wipe away all your debt
It’s hard to get in a relationship with someone who makes promises they can’t keep. If a company is promising they can wipe out your debt or slash it in half, a red flag should go up.
It’s true that there are ways that your federal student loans can be forgiven if you meet the requirements. Those include being employed by a government or not-for-profit organization, and making at least 10 years’ worth of payments. If that’s you, you may be able to receive loan forgiveness under the Public Service Loan Forgiveness Program or if you’re a teacher you might be eligible for the Teacher Loan Forgiveness program.
However, taking advantage of these opportunities is totally on you, so beware of any company telling you they can make it happen without the above circumstances.
If you have private loans, the fact is that they don’t have a loan forgiveness option. Consider reaching out to your private lender directly to inquire about this as rules can change, but walk away from anyone promising to alleviate you of all your private debt without you actually having to pay it off.
Red flag #2: Charging a fee to help you
There are federal programs available to help with federal student loan debt and enrolling in one of those programs costs you exactly $0.00. Not a typo. It’s free.
A scam artist will entice you by letting you know these programs are available to you and that they can help enroll you into one. All you have to do is pay them a fee. Don’t fall for it!
Also, watch out for companies that want to charge you a fee to help you refinance or consolidate any of your loans. You typically can do that without an upfront fee as well.
Why pay someone for something that you can do on your own at no cost besides your time? It’s true that time is money and money is time, but in this case it doesn’t sound like a good deal. Check out your federal loan servicer for more information – they are there to help for free.
The bigger lesson here is that whenever you’re presented with programs that require upfront or advanced fees before they help you, it’s a sign that you may be about to fall for a scam.
Red flag #3: Pressure to act immediately
In most areas of life when someone is trying to rush you into making a decision, it’s a good time to pump the brakes a bit and do your due diligence. Check out the company or program you’re considering. How much information is out there about them? Are there reviews available for you to learn more about them?
Visit their website, but don’t enter any personal information on their site before you’re comfortable that it’s safe. Ask people you trust which companies they’ve used to refinance or consolidate their loans. Take the time you need to make sure you’re signing up for a good deal. If anyone is trying to get you to act right away before a “deal” goes away, let it – it’s probably not a good deal anyway.
Red flag #4: Requesting your social security or account number
Another red flag is when a company contacts you first, then asks for personal information like your Federal Student Aid ID or your Social Security number. Obviously if you’re making a call to a loan servicer or to refinance or consolidate, you’ll eventually have to provide that information, but anyone contacting you and leading with that request should be a red flag.
A legit company will likely not ask you for this type of personal or sensitive information until you’ve decided to move forward with engaging their services.
What to do if you suspect a scam
The reality is that scam artists exist. If you come across a student loan scam, please take the time to report it by filing a complaint with the FTC, and the CFPB.
The bottom line is that the best way to pay off your student debt, whether you have federal, private or both, is to know your options and put together a plan of attack on your own. Sometimes that may mean not prioritizing paying back your student loans over other financial goals, other times it may mean that you do. Either way, take caution not to get scammed in the process.