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How do I avoid student loan scams?

Scammers are constantly finding new ways to steal your money. You can protect yourself from student loan scams by knowing what to look out for.

You may qualify for as much as $20,000 in federal student debt cancellation
Borrowers who have federally-held loans and meet income limits can apply for up to $10,000 in student debt cancellation—or up to $20,000 if they received a Pell Grant in college. The pause on payments and interest has been extended until December 31, 2022.

Scammers often target distressed borrowers or people looking for help to manage their loans. Some debt relief scammers run aggressive marketing practices to target vulnerable student loan borrowers.

Borrowers should be aware of the warning signs of student loan scams to avoid becoming a victim. If you are suspicious of the company contacting you, be sure to work with your student loan servicer .

There are several warning signs that you may be dealing with a student loan repayment or forgiveness scam.

  • Pressure to pay up-front fees. If a company requires you to pay an up-front fee or tries to make you sign a contract on the spot, it is likely a scam. These companies may even ask for your credit card number online or over the phone before they explain how they’ll help you. Avoid companies that require payment before they actually do anything, especially if they try to get your credit card number or bank account information. Remember that free assistance is available through your student loan servicer. Companies that request payment for debt relief services before providing help are breaking the law.
  • Promises of immediate student loan forgiveness or debt cancellation. Debt relief companies do not have the ability to negotiate with your creditors for a “special deal.” For federal student loans, payment levels under income-driven payment plans are set by federal law and, for most borrowers, loan forgiveness is only available through programs that can require many years of qualifying payments or other qualifying criteria.
  • Guarantees to remove legally owed debts from your credit report. Credit repair and debt settlement companies cannot remove debts that you legally owe. However, if a debt collector contacts you to repay a debt, verify that you owe it. Get debt validation in writing.
  • Demands that you sign a “third party authorization.” You should be wary if a company asks you to sign a “third party authorization” or a “power of attorney.” These are written agreements giving them legal permission to talk directly to your student loan servicer and make decisions on your behalf. In some cases, they may even step in and ask you to pay them directly, promising to pay your servicer each month when your bill comes due. Beware of any company that cuts off communication between you and your servicer.
  • Requests for your Federal Student Aid information. Be cautious about companies that ask for your FSA ID – a unique username and password to access information about your federal student loans. If you give that information away, you are giving a company the power to perform actions on your student loan on your behalf. Do not provide your FSA ID to anyone. The Department of Education or your servicer will never ask for your FSA ID or password.
  • Claims to be affiliated with the Department of Education or your student loan servicer. Scammers may try to appear legitimate by using official sounding names, logos, or websites. For federal student loans, if you want to consolidate your student loans or change repayment plans, the process should happen through one of the government’s official loan servicers or websites with “.gov” in their addresses.

Despite what these companies may tell you, the quickest way to deal with your student loan debt is NOT to pay someone else to contact your creditor. If you’re struggling to repay your student loans, you should always contact your servicer directly for help. You can access information such as enrolling in alternative repayment programs for your federal and private student loans directly through your servicer – at no cost to you.

If you’ve fallen behind on your student loan payments, you have options

Everything a debt relief company offers, you can do for free by yourself. You can change your repayment plan with your servicer for free. You can also negotiate your own debt settlement.

There are federal student loan repayment programs that can help remove the default status from your credit report. Be sure to learn about what’s available by contacting your servicer or through the CFPB’s Repay Student Debt tool. Don’t pay hefty fees for something that likely won’t live up to your expectations or that you can get for free.

How to get help if you have been the victim of a student loan forgiveness scam

Report a scam to the Federal Trade Commission, or to your state Attorney General, if you have been the victim of a student loan debt relief scam. You should also let your student loan servicer know and instruct them to only provide information about your student loan directly to you.

Need additional help? Ask a nonprofit. There are non-profit organizations that can help you figure out a plan to repay your debt. Non-profit credit counselors sometimes offer student loan coaching services. They will generally offer free budget analysis services to look at all your debts and may offer additional support to help you sort out your student loan options for a fee. Honest companies will never cut you off from communications with your servicer or require you to sign a contract without first providing an initial budget consultation. You should always be involved in communications with your servicer, as well as in the completion of any paperwork to change your repayment plan.

See a few more tips for avoiding scams and wasting money repaying your student loans.