A new study released by NerdWallet, a financial analytics website, claims more than 130 companies are attempting to scam struggling student loan borrowers. These businesses claim they can reduce or forgive student loan debt, but instead cheat borrowers out of money that could have gone towards monthly payments. Unfortunately, the Consumer Financial Protection Bureau and the Federal Trade Commission have been unsuccessful at resolving this issue. Only seven student loan scam companies have been shut down by the authorities. More than 130 are still operating. You may avoid student loan scams by looking for red flags include:
- Requiring up-front payments: Student loan scammers will require up-front payments for services. In some cases, they may charge several hundred or thousands of dollars. However, it is against the law for debt relief companies to charge these payments. Debt relief companies cannot charge you fees until after they have successfully lowered monthly payments.
- Overpromising results: Like most scams, these companies make promises that are too good to be true, such as immediate loan forgiveness. While loan forgiveness programs do exist for federal loans, they take years or decades to complete. In other cases, very specific criteria must be met before becoming eligible for loan forgiveness.
- Social media advertising: Student loan scam companies may target you with Facebook and search engine ads. These ads may promise to lower monthly payments or forgive remaining balances. They may even include the name of your school in the ad, claiming other graduates from your alma mater have discharged their loans.
Are There Free Solutions for Student Loan Problems?
Student debt scam companies target borrowers who are behind on payments or in default. Unsurprisingly, these borrowers are at an increased risk of falling victim to scams that promise loan forgiveness or lower monthly payments for large up-front fees.
Borrowers with federal loans can take advantage of income-driven plans that lower monthly payments. These borrowers may also have options to pull their student loans out of default. Both options do not cost money. Our blog has discussed these options in detail on multiple occasions. Borrowers with private student loans may have fewer options to lower monthly payments. In these cases, it is up to the discretion of the lender to lower payments or offer loan forgiveness.
The Kansas City bankruptcy attorneys at The Sader Law Firm can help struggling student loan borrowers explore options for debt relief, including bankruptcy. Attorney Neil Sader was featured in Missouri Lawyers Weekly for helping a client discharge $250,000 in student loan debt.