Avoiding Scams from Student Loan Debt Relief Companies (2022)

Have you received a call or text from a company promising to help with student loan debt relief? If so, beware! Read this post first to avoid being scammed!

Notes from a Champion Student Success Mentor

I called one of our borrowers and explained who Champion is and why we were calling her. She gave me her date of birth to verify her account. I said we were calling to inform her about updated status information for her student loan due to COVID 19. She said I already took care of my student loans by paying a loan debt forgiveness company. She said she paid that company a fee upfront to have her loan forgiven. I explained that you don’t pay to have your loan forgiven! When I asked more questions, the borrower said the debt forgiveness company did not mention her school’s name, wanted a fee upfront. I explained that those are red flags. She called that company back to stop future payments, but the number was not in service.

That same day, the borrower called me back and shared that she called her bank and explained what had happened. Thankfully the bank refunded her account and issued her a new debit card.

Identifying Student Loan Scams

At Champion, we are in regular contact with student loan borrowers, and we are alarmed by the massive number of borrowers who reported to us that they are receiving phone calls, emails, letters, or texts offering them relief from their federal student loans or warning them that student loan forgiveness programs would end soon.

The truth is that usually, the so-called student loan debt relief companies that offer these types of services don’t offer any relief at all. And sadly, most often, these companies are fraudsters preying on student loan borrowers. To help you avoid being scammed, check out these examples of the four most common false claims made in these communications and research more before you take any action or share any information.

The Four Most Common False Claims

  1. Act immediately to qualify for student loan forgiveness before the program is discontinued.

  2. You are now eligible to receive benefits from a recent law that has passed regarding federal student loans, including total forgiveness in some circumstances. Federal student loan programs may change. Please call within 30 days of receiving this notice.

  3. Your student loans may qualify for complete discharge. Enrollments are first come, first served.

  4. Student alerts: Your student loan is flagged for forgiveness pending verification. Call now!

Communications using these types of aggressive advertising are meant to lure borrowers and are NOT coming from the U.S. Department of Education (ED) or its partners. To help you identify student loan debt relief scammers, check out these six signs:

Six Signs of Student Loan Scammers

  1. You are required to pay up-front or monthly fees for help. If a company requires a fee before they do anything, that’s a huge red flag—especially if they try to get your credit card number or bank account information. In some cases, they may even step in and ask you to pay them directly, promising to pay your servicer each month when your bill comes due. Free assistance is available through your federal loan servicer.

  2. You are promised immediate and total loan forgiveness or cancellation. No one can promise immediate and total loan forgiveness or cancellation. Most government forgiveness programs require many years of qualifying payments and/or employment in certain fields before your loans can be forgiven. Also, student loan debt relief companies do not have the ability to negotiate with your federal loan servicer for a “special deal” under the federal student loan programs. Payment levels under income-driven payment plans are set by federal law.

  3. They ask for your FSA ID username and password. ED or its partners will never ask you for your FSA ID password. Your FSA ID is used to sign legally binding documents electronically. It has the same legal status as a written signature. Do not give your FSA ID password to anyone or allow anyone to create an FSA ID for you. If a company has access to your FSA ID information, they can make changes to your account without your permission.

  4. You are asked to sign and submit a third-party authorization form or a power of attorney. These are written agreements giving the third-party legal permission to talk directly to your federal loan servicer and make decisions on your behalf. Debt relief companies often want these authorizations so that they can change your account and contact information, so you don’t realize that they aren’t actually paying your monthly student loan bill.

  5. They claim that this offer is limited and encourage/pressure you to act immediately. Student loan debt relief companies often try to instill a sense of urgency by citing “new laws” or discontinuing programs as a way to encourage borrowers to contact them immediately. While there are some deadlines you need to meet regarding your student loans—for instance, if you’re paying under an income-driven repayment plan, you need to recertify annually—our programs are limited only by the eligibility requirements.

  6. Their communications contain spelling and grammatical errors. While many of the communications sent out by these companies look very formal (for example, fold-and-tear letters with safety patterns), they often contain spelling and grammatical errors. If you notice unusual capitalization, improper grammar, or incomplete sentences in the communication you receive, that’s likely a red flag that the company is not affiliated with ED.

Curious about how these scammers sound? Read this article on NPR that has actual recordings of scammers!

For more tips on identifying a student loan scam, visit the Federal Trade Commission’s website.

Report Student Loan Debt Relief Companies

If you have already shared your information or paid a student loan debt relief company, you should do the following:

Contact your federal loan servicer to revoke any power of attorney or third-party authorization agreement that your servicer has on file. You should also make sure no unwanted actions were taken on your loans.

Contact your bank or credit card company, and request that payments to the company be stopped.

File a complaint with the FTC.

File a report of suspicious activity through the Federal Student Aid Feedback Center.

Also, be sure to log in and change your account password at StudentAid.gov.

Do NOT share your account password with anyone!


Additional Links:

Student Loan Repayment

Repayment Plans

Income-Driven Repayment Plans

Student Loan Forgiveness