A Student Loan Cancellation Prepayment Should Never Be Made
Americans owe $ 1.67 trillion in student loans, and predatory private companies or outright fraudsters thrive , luring borrowers with offers of debt cancellation or payment cuts. If you are asked to directly pay in advance before you see a student debt write-off, stay away. This is a scam.
How to know if a debt relief offer is a scam
Not all debt relief companies offering to consolidate your loans are cheating on you, but they may think they are. These companies may run aggressive ads on Facebook and Google, or contact you by phone. They usually fill out paperwork on your behalf and charge additional fees for things that could otherwise be done on their own, so remember that admission to the government payments program can be done directly through the US Department of Education or their loan officer. Visit the Federal Student Aid website for more information (for private loans, contact your loan company directly).
Debt relief companies are considered scams when they charge you for a service and then fail to deliver. Fortunately, there are some easy ways to spot scammers offering debt relief.
Don’t pay upfront or monthly payments
When a student loan company offers you a tempting interest rate or loan terms and then asks for a prepayment, it’s a scam. The commission can be in the form of a small percentage of the loan amount, monthly fees or a flat rate of several thousand dollars, or even a second personal loan that you “pay off.” It is illegal for student debt relief companies to charge fees before they lower or repay a client’s loan.
Don’t trust promises of immediate loan forgiveness
Student loan companies cannot promise immediate forgiveness or student loan cancellation. There are legitimate government loan forgiveness programs, such as government service loan forgiveness, but it takes years of appropriate payments or appropriate employment for loans to be forgiven. Beware of companies that claim to have a special relationship with the Ministry of Education (which they don’t).
Never share your FSA ID password or other personal information
Never share your FSA ID with anyone, as it has the same legal status as a written signature. You also don’t have to give your Social Security number when you don’t need it. This data enables companies to log into your account and make decisions on your behalf. If you think you have noticed fraud, report it to the FTC , CFPB, and your state attorney general’s office .