Even before graduating from college, the average American college student today gets a thorough education about what it's like to be deep in debt. The average student loan balance in the United States today is $37,172, but many students owe more than that. Total student debt now exceeds $1.5 trillion. That’s $1,500,000,000,000--and it's owed by more than 44 million Americans.
Yikes.
Student Debt Relief Scams
When you see numbers like that, you realize that there are a lot of people who are carrying a significant loan burden—and would probably love to have it lifted. Those people who are deep in debt and desperate for help are the targets for student loan relief and forgiveness scams.
Maybe you’ve seen some ads and commercials like these:
- “Act immediately to qualify for student loan forgiveness before the program is discontinued.”
- “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.”
- “Your student loans may qualify for complete discharge. Enrollments are first come, first served.”
Those ads and others like them have been specifically cited by the Department of Education as being parts of schemes that falsely promise student loan forgiveness in exchange for either an up-front payment or a monthly subscription.
Here’s the truth: no one can promise to wipe out (or even reduce) your student debts. There are ways that you can attempt to get your loans forgiven, canceled, or discharged, but you don’t need to hire a company to pursue those options. You can make the attempt for free at the Department of Education’s own website.
How Can You Spot a Student Debt Relief Scam?
If you see an ad for student debt relief, you should be very, very cautious. Since you can make a request to have your student loan canceled yourself for free, why would you pay someone else to do it for you? In particular, the FTC cautions people not to enter into business with companies that:
- Require you to pay an up-front fee. That's illegal.
- Promise fast loan forgiveness. In those rare cases where student loans are forgiven, the process always takes time.
- Use a Department of Education seal or other official logo. If the website doesn't have a studentaid.gov or an ed.gov address, it's not legit.
- Rush you into making a decision. Scammers will try to convince you that you must act now so that you don't have time to carefully consider your decision.
- Ask for your FSA ID or Social Security number. Con artists can use that information to get into your account and steal your identity.
What is the FTC Doing About Student Loan Forgiveness Scams?
The FTC prosecuted several student loan relief scammers in 2016. In one case, scammers enticed indebted students with promises that they could “GET RID OF YOUR DEBT TODAY!” The phony debt relief company charged an illegal up-front fee of $250 plus a monthly fee of up to $303 that some people paid for as long as 36 months.
Another fraudulent outfit advertised “Get Your Student Loans Forgiven Now!” and charged consumers $199 per month or more for five months.
A third con artist bilked consumers out of up-front fees ranging from $500 to $800 and promised they could favorably renegotiate the terms of people’s student loans.
Needless to say, no one’s loans were forgiven or renegotiated. And people who were already struggling under the weight of student loans were cheated out of thousands of dollars apiece.
Student debt relief scams are so widespread that the FTC took the unusual step of producing a comic book—a fotonovela, actually—about the issue. In “Maria and Rafael Learn the Signs of a Debt Relief Scam,” the financially-stressed parents of a recent college graduate are almost victimized by debt relief fraud. The advice the book relays at the end is pretty important.
“A reputable debt relief company:
- Won’t make you pay before it does anything to help you;
- Won’t guarantee it can get rid of your debts;
- Won’t say it has special access to government assistance programs.”
Student loans can be oppressive. Just make sure that as you look for ways to dig out from under a pile of debt, you don’t accidentally get yourself deeper in the hole by giving your money to a con artist.