With capitalized interest, tens of thousands of dollars in debt and high monthly payments, it seems unfathomable that student loan debtors could face additional obstacles. However, student loan scammers have been costing recent graduates thousands of dollars. In a recent article posted on Nerd Wallet, a financial statistics website, several students gave horror stories about how they were targeted by scammers.
One woman interviewed had recently finished an undergraduate degree in computer science and held $35,000 in student loan debt. After hearing an ad on the radio claiming she could reduce her high monthly payments, she jumped at the opportunity. What the recent graduate did not know, is that the advice the scammers had planned to give her can be obtained at no cost. The company required the woman to pay a one-time processing fee of $695, and it would work with the Department of Education to consolidate her loans under an income-based repayment program.
Unfortunately, the woman could have accomplished the same goals had she contacted the Department of Education or her current lender on her own.
How to Avoid Student Loan Scammers
Fortunately, there are ways to avoid financial predators that prey on struggling graduates.
- Graduates can look up companies on the state attorney general’s website, which has information on consumer complaints. It is possible the same company has scammed other graduates.
- Know which consolidation options are available for your loans. Income-based repayment programs require graduates to show proof of income, at which point the Department of Education might reduce monthly payments. We recently posted a blog on which income-based repayment options are available for specific federal loans. Depending on the situation, borrowers with federal loans have many options to consolidate and reduce monthly payments.
- Legitimate debt settlement companies will never attempt to charge fees up-front.
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