Student debt is a problem for many young people who are eager to pursue university studies and get a degree. Only in the United States, more than 42.9 million citizens, which means one in eight people have to pay student debts. At a national level, the US carries a total debt of $1.71 trillion due to student loans which means an average of $37,693 per person as shown by EducationData.org reports.
Naturally, those who borrowed money for their tuition fees need years, even decades to pay off their loan. Not surprisingly, many people try to access loan forgiveness programs that allow them to tackle their debt. Unfortunately, not all programs that promise to help former students resolve their debts are real. Some are well-engineered scams that only aim to gather sensitive personal information or even collect money from people who are already struggling with debt. There are different types of student loan scams. Here are some of the most common ones and a few basic tips on how to avoid them
The most common way to take advantage of people who are trying to get rid of their student loans is by promising them a fast and easy way out of their debt. Scammers who rely on this tactic usually call or email borrowers claiming to be consultants who help people access student loan forgiveness programs. The major red flag you should spot in this case are unreasonably high fees. Normally, student loan forgiveness programs are free. There are also myriad legitimate consultants out there that can help you out, but they charge a reasonable fee for helping you with the necessary application. Therefore, the most important aspect to watch out for is the fee you’re asked to pay. Before you rush to send money to a company or an individual consultant, do your research to see how much their competitors are charging.
Moreover, it’s important to remember that these programs are usually lengthy. If someone promises that they’ll help you cancel your debt immediately in exchange for a fee, you might be dealing with a scam.
Another common scam is student loan debt consolidation. It is possible to consolidate this debt to make it easier to pay it off and there are different financial consulting firms that deal with this type of debt, among others. In this case too, the red flag you should watch out for are high fees. Furthermore, in many student loan consolidation scams, fraudsters simply charge money without handling the person’s debts. This leaves victims with the same debts and financial loss caused by the fee they paid. People who fall for these scams often trust fraudsters blindly, so they don’t check how and if their debt was canceled or consolidated. In the worst-case scenario, the debt even leads to default. The main lesson to draw from these scams is that it’s always necessary to ask for proof. Whether you’re paying for debt forgiveness or consolidation, ask your advisor to provide you with proof of your debt status.
Some companies promise to negotiate the repayment or forgiveness terms for the student loans owed to private lenders. You should be cautious if a firm asks you to send them your loan payments instead of paying lenders directly. The firm will claim that they can keep your money safe until the new payment terms are negotiated and that the money will boost lenders’ confidence and willingness to negotiate. However, if the whole offer is a scam, you will end up losing money and getting stuck with the same debt.
Besides making money by pretending to help people enroll their debt in a student loan forgiveness program, scammers often use all sorts of tactics just to be able to get hold of people’s sensitive personal information such as names, addresses, bank account numbers, social security numbers, etc. This type o sensitive information allows them to carry out fraud or even worse, identity theft.
Despite all these worrisome consequences, it’s important to remember that legitimate student loan forgiveness programs do exist, and they can easily be accessed through government websites or organizations that offer their help for free. For this reason, before you agree to allow anyone to settle your student debt, you should first try to see if you can do this on your own. Generally, to get you enrolled in a student loan forgiveness program, no advisor or firm does anything you can’t do yourself.
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