Student loan scams: three red flags to avoid
Wouldn’t it be great if your student loans were magically erased overnight? That’s essentially the promise made by many “student loan forgiveness” ads. The problem, of course, is that it’s a scam. While the government now offers more flexible terms for certain borrowers, it won’t wipe out your debt scot-free.
So how do you identify legitimate government loan assistance from scams? Watch for these red flags:
Red flag 1: pay to play
Never use a company that requires upfront payment for its services. In fact, in many cases it’s actually illegal for businesses to charge to settle your debt. So if you click on a banner ad or call a company that is all-too-happy to help you—as long as you pay up—avoid it. As an alternative, contact BALANCE. Our certified financial counselors offer free assistance to credit union members, and can help make a plan to pay down student loan debt.
Red flag 2: the guarantee of instant debt relief
Put simply, instant debt relief is a myth. A sure sign of a scam is any company that offers to secure loan forgiveness, or get you out of default. The only thing a company can do is help you apply for a Direct Consolidation Loan—and it’ll charge you for it. If you qualify for this kind of loan, you can apply on your own for free.
Red flag 3: in-your-face advertising
Have you ever noticed those Google ads at the top of your search results promising loan forgiveness? Or maybe you’ve seen them in your Facebook feed? Ignore any company that advertises aggressively—or at all, really. It’s likely out for profit, and wants to fool you into thinking you need its service.