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What to Do If a Student Loan Company Scams You

Scott Bilker Scott Bilker is the founder of DebtSmart.com and author of the best-selling books, Talk Your Way Out of Credit Card DebtCredit Card and Debt Management, and How to be more Credit Card and Debt Smart. Receive the 5-Year Loan Spreadsheet when you subscribe to his email newsletter.

As of the first quarter of 2019, there was $1.56 trillion in outstanding student debt. The average loan amount for the class of 2017 was $28,650. Currently, there are some 44 million people carrying student loan debt and they are looking at 10 to 30 years to pay it off.

Of course nefarious individuals will come sniffing around for easy paydays in such a target-rich environment. Rip-offs happen all the time, to intelligent college-educated people. In other words, you’re in good company if it happened to you too.

Here’s what to do if a student loan company scams you.

Student Loan Scam Red Flags

Yes, it’s possible you’re being scammed right now without realizing it. Take another look at the company with which you’re working if it has exhibited any of the following traits:

  • Promises total loan elimination: Most student loans cannot be charged off.
  • Requests your FSA (Federal Student Aid) ID: This is an electronic signature, used to apply for financial aid and sign loan promissory notes. Sharing your FSA ID is like giving someone a blank check.
  • Claims Dept. of Education, or other government, affiliation: While it’s true that the Department of Education does contract with a few companies for the management of student debt, it’s always a good idea to check the Federal Student Aid website to see if the company contacting you is listed.
  • Charges an application fee for loan consolidation: You can apply for a consolidation loan on your own for free.
  • Offers to make payments on your behalf: Those payments usually don’t get made.
  • Advises you to stop making payments: This will push your loan into default and wreck your credit.
  • Advertises quick help: There are no fast fixes for student loan debt. Resolving them takes time and a concerted effort.

You might be getting victimized if you’ve encountered any of the above.

Actions You Can Take

If you’ve determined a student loan company has scammed you, your first step should be to inform all three of the credit reporting agencies (Experian, Equifax and TransUnion). Report an incidence of fraud and ask them to freeze your credit to head off any unauthorized usage of your personal information.

Change your password immediately if you shared your FSA ID number. File complaints with the Office of the Inspector General, your state’s Attorney General’s office, the Consumer Financial Protection Bureau and the Federal Trade Commission.

Contact your loan servicing company as soon as possible to report the situation. Change your account passwords and reverse all power of attorney privileges you may have agreed to furnish. Work out a plan to move forward with your loan repayment by setting up an agreement you can afford to repay.

Issue stop payment orders with your bank, credit union or credit card companies if you’ve authorized the automatic payment of fees.

Do It Yourself

Here’s the thing: You can do anything on your own that the companies offer to do on your behalf. You’ll find a wealth of information at the Federal Student Aid website. You can apply for loan forgiveness, renegotiate payment plans and consolidate your student loans; as well as request deferments and forbearances.

The simple truth is anyone offering to do these things for you for a fee is probably trying to take advantage of you. Sadly, knowing what to do if a student loan company scams you is tantamount to closing the barn door after the horses have run away. Your best defense is to always operate under the premise that if it sounds too good to be true, it probably is.

This entry was posted in Student Loans. Bookmark the permalink. Read more articles by Scott Bilker. (Also see articles by all authors and articles in all categories.)

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