According to the Better Business Bureau, scammers are using student debt to try to steal money from college students and graduates.
BBB's Emily Valla says the scheme often starts as a phone call, email or letter to the student that claims their company can alleviate all student loan debt for a fee.
"The caller claims their offer is limited and encourages you to act immediately. The company may try to instill a sense of urgency by citing 'new laws' or discontinuing programs as a way to encourage borrowers to contact them immediately. They also claim to have helped other student loan holders. But, student loans can only be forgiven under very specific circumstances, which aren’t fast or easy. Instead of helping, they take your fee and disappear," Valla said.
So what fees are red flags?
According to the U.S. Department of Education:
· They require you to pay up-front or monthly fees for help. "It is illegal to charge an upfront fee for this type of service, so if a company requires a fee before they actually do anything, that’s a huge red flag, especially if they try to get your credit card number or bank account information. In some cases, they may even step in and ask you to pay them directly, promising to pay your servicer each month when your bill comes due. Free assistance is available through your federal loan servicer," Valla said.
· They promise immediate and total loan forgiveness or cancellation. "Most government forgiveness programs require many years of qualifying payments and/or employment in certain fields before your loans can be forgiven. Also, student loan debt relief companies do not have the ability to negotiate with your federal loan servicer for a 'special deal' under the federal student loan programs. Payment levels under income-driven payment plans are set by federal law," Valla continued.
If you do need assistance with your student loans, know your options. Contact your lender directly to discuss ways to repay your debt. Options may include making lower payments or suspending loan repayments for a while. Also, BBB suggests never giving a third party power of attorney. "Don’t sign anything giving a company the power to negotiate on your behalf. A fake company can use this to take control over your loans," Valla said.
Always do your research and take the time to ask questions. For more information, visit www.bbb.org.