3 Red Flags to Look for in Student Loan Scam
Knowing the signs of a potentially harmful student loan scam can save consumers hundreds of dollars in unnecessary fees.
FREMONT, CA: There are about 44 million student loan borrowers in the U.S., and the country’s total outstanding loan balance is forecasted to exceed $2 trillion by 2022. The average student loan balance is around $30,000, up from $10,000 in the early 1990s, with several borrowers owing $100,000 or more. The average bill is $400 a month, according to experts. For fraudsters, this is all an opportunity. The student loan scam usually promises student debt forgiveness and lower payments. They often request upfront fees for this service, which is illegal. Here are some red flags to look for and tips on what to do instead.
Upfront or Monthly Fee
There’s nothing a debt relief firm can do that one can’t do on their own. And it’s not illegal for a firm to charge for services they could do for free. Some people compare student loan relief services with tax preparation. But it is illegal for the firm providing student debt relief to collect fees over the phone before they reduce or settle loans. Borrowers with federal or private loans can request a pause on payments by asking for deferment or forbearance.
Promising Immediate Loan Forgiveness
One must beware of companies that claim to help students get loan forgiveness. This is a student loan scam. Like Public Service Loan Forgiveness, there are legitimate government programs that can mitigate or avoid federal student loans after a specific amount of time. However, some individuals qualify for the programs. Using Federal Student Aid’s Repayment Estimator to see the monthly payment and projected loan forgiveness on several plans based on the income and family size.
Instilling Urgency in Relief Services
Firms selling student loan relief services are usually staffed by sales representatives who earn commissions based on the customers they sign up for. They aim to create a sense of urgency. But one does have time to make careful, well-researched decisions about the debt. There are no legitimate loans that are available only for a short period.
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