Beware of student loan debt relief scams
You don’t have to pay someone to help you with student loan repayment. Services offering student loan debt relief are often just trying to scam people out of money.
The Consumer Financial Protection Bureau (CFPB) has put out a consumer advisory on student loan debt relief companies. Often these companies are taking advantage of student loan borrowers who are desperate and, in the end, can cost cash-strapped student borrowers more money and time.
The CFPB warns borrowers to steer clear of companies that promise “student debt relief.” Often, the borrowers don’t believe there student loan servicer will work with them and instead will seek out a third party company believing this is the answer to their problems.
These debt relief companies make all kinds of false claims including having relationships or expertise working with the Department of Education. In fact, the service for which they charge hundreds of dollars, a person can do for free. In other cases, the companies don’t deliver on their promises and leave borrowers with less money and time to deal with your student loan issues.
So what are the warning signs that you may be dealing with a student loan debt relief company trying to scam you out of money?
- Pressure to pay a high up-front fee and sign a contract. Avoid any company that asks for payments before providing you the service. Remember, free assistance is often available through your student loan provider.
- Promises of student loan forgiveness and/or cancellation. There are special rules and guidelines to be eligible for these programs. Plus, for the forgiveness program you have had to show a number of years of consistent payment to qualify.
- Request that you sign a third-party authorization. If you sign this authorization you are giving them legal permission to talk directly with the loan servicers and make decisions on your behalf.
- Ask for your Federal Student Aid PIN. Your PIN is your unique ID and serves as your signature on federal student loans. If you give this number away it ultimately provides the company access to all your student loan information and personal information.
If you believe you have been a victim of a student debt loan relief scam or feel that you are not getting assistance from your student loan services contact CFPB. Also, the CFPB has more information on how to manage your student loan debt. It will show your options so that you can choice that best option for your financial situation.
Michigan State University Extension offers a number of education programs including education programs on financial management and housing education. Also visit MIMoneyHealth.org, which offers a number of free educational materials and resources.