The Consumer Financial Protection Bureau (CFPB) has warned borrowers that a rise in defaulted student loans has created opportunities for scammers to target people behind on their debts. According to the CFPB, scammers set up fake companies that promise struggling borrowers lower payments on their student loans. Some of these companies charge monthly fees for their services, while others take money from borrowers and disappear. Struggling student loan borrowers are often left in an even worse financial position. The good news is that student loan scams are extremely easy to spot.
How Student Loan Scammers Target Borrowers
While there are legitimate services and businesses that can help borrowers lower their monthly student loan payments, many scammers have some of the same characteristics.
They look and sound legitimate: Scammers might use imagery or language that make them appear to be affiliated with the Department of Education. In some cases, they may use the Department of Education’s logo without permission. Student loan scammers use language that sounds official, but in reality is untrue. For example, scammers may claim they can lower your payments with President Obama’s new student loan forgiveness program. In reality, these are existing Department of Education programs that have little or nothing to do with President Obama.
They charge upfront fees: Student loan scammers make money off of struggling borrowers by charging fees. They may ask for $600 upfront to reduce monthly payments. In other cases, they require borrowers to make monthly payments. Upfront fees are illegal, and always a major giveaway that the business is a scam.
Scammers buy social media and electronic data: Some scammers use social media data to discover what schools borrowers went to, which allows them to create ads that sound more official. For example, an ad that appears on your Facebook feed might say graduates of your university are entitled to lower monthly student loan payments.” Social media is a popular way to target borrowers, but scammers may also resort to phone calls, email, direct mail or text messages. The National Consumer Law Center has warned that scammers are also acquiring data from third parties to discover how much borrowers owe in student loans. They use this information to sound more official.
How You Can Avoid Student Loan Scams
Student loan scammers offer information that can be obtained from servicers or the Department of Education at no cost. If you want to lower monthly payments, call your servicer or the Department of Education. Enrolling in income-based programs does not cost anything.
A good rule of thumb for avoiding scams, is that if something sounds too good to be true, it probably is too good to be true. Scammers press struggling borrowers with a sense of urgency and promise instant solutions. Reducing student loan payments takes time and effort. It cannot be done overnight.
We regularly update our blog with helpful and free information on how borrowers may lower student loan payments, or in some cases, discharge remaining balances.
The Kansas City bankruptcy attorneys at The Sader Law Firm can help student loan borrowers find solutions for managing debts with or without filing for bankruptcy.