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5 Common Student Loan Scams - And How to Avoid Them

Friday, October 13, 2017

Students these days have it hard. Not only does it cost thousands of dollars to study at college and not only are you left with a huge student loan. You also have to contend with scammers trying to eke more money from your already depleted bank account.

Students are understandably looking for any way in which they can pay off or save money on their student loans. Unfortunately, there’s rarely an easy way out. And anyone who offers you one is likely running a scam.

Here are the five most common student loan scams and how to avoid them:

Advanced Fees
Some fake student loan companies ask you to pay an initial fee in order to secure the best interest rate and loan terms. You should never pay advanced fees to a loan company. No reputable lender, be they public or private, would operate in such a way.

However, some third party companies who act as a broker in securing your loan or repayment plan, will ask for an upfront fee. Bear in mind that this fee should go into an escrow account and only be released once the company has signed you up to an appropriate program.

Loan Consolidation
If you’ve taken out multiple student loans, all with differing terms, consolidating those loans upon graduation can be a good idea. However, tread carefully. Scammers are posing as loan consolidation companies and charging a fee to consolidate your loan. This fee may be called an administrative fee, a processing fee or a consolidation fee. Whatever they call it, if you’re dealing with a scammer, they’ll take your money and do nothing to improve the status of your loan. Federal student loans can be consolidated without any fees 

Student Loan Debt Elimination
Whilst loan forgiveness may be an option depending upon the career you choose after graduation, debt elimination does not exist. As with most things, if something seems too good to be true, be suspicious. Don’t pay a company to help you with debt elimination as they will take your money and run. There are many good loan forgiveness programs out there but finding the right one will require some research. As in the case of the 
Obama Student Loan Forgiveness Program, not all are genuine.

Personal Details Request
Some scammers pose as reputable lenders in a bid to access your personal details. Be very wary of handing over sensitive information such as your social security number or FSA ID. And if a lender or agency asks to “take over” your loan, run the other way. Without your own access to the loan account, you can’t be sure of what is happening with it. Take care of your personal and loan account details to make sure your data stays secure.

Pay Off A Default
If you default on a loan payment, you’re likely worried about the ramifications and the effect it will have on your credit score. Some scam agencies claim that they can rectify a default if you pay them a fee. Don’t trust anyone who makes you this promise. Instead, remember that lenders are legally required to help you work out a solution to repayment defaults. A variety of student loan relief services including consolidation or rehabilitation are open to you and are all free to explore.

Whether you’re trying to secure, consolidate or seek forgiveness on a loan, make sure the companies you’re dealing with are reputable. Remember that there’s no easy solution to student debt and that dealing with a scammer, you stand to lose more money than you stand to save.

About our Guest Blogger:  Sienna Walker is an avid traveler, a staunch supporter of self-improvement and a book lover. Deeply interested in education, Sienna often writes inspirational and educational articles for students on behalf of DirectorStats.  Feel free to follow her on @SiennaWalkerS


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