A Burden for You, An Opportunity for Scammers
Educational debt has reached levels that are hard for the average American to fathom. By some estimates, outstanding student loans have reached a whopping $1.45 trillion dollars. Over 44 million Americans have some form of student loan debt, with 2016 graduates averaging over $37,000 in debt.
That's an enormous pool of outstanding debt – or, as scammers would classify it, an enormous pool of opportunity.
Consumers who are struggling to pay off student loans can easily fall prey to the siren song of scammers promising fast loan forgiveness or similar assistance for upfront fees. However, these scammers can't provide the fast loan forgiveness that they promise – and, even if they could, it's illegal for these companies to charge fees before providing assistance.
The Federal Trade Commission (FTC), in cooperation with state agencies, has begun an enforcement campaign against student loan scammers. As of this writing, the FTC and state law enforcement agencies in 11 states and the District of Columbia have taken 36 total actions as a result of "Operation Game of Loans" (who says that government agencies have no sense of humor?).
There's No Easy Way
The companies in the FTC action claimed to be affiliated with either the government or a student loan servicer. Borrowers were lured in with some false promise of quick approval and then pressured to sign up for their service programs, which required advance fees of up to $1,500. Borrowers received few, if any, services in return – and services that were provided could have been acquired for free through the U.S. Department of Education or through their loan servicer. According to the FTC, scammers had collected over $95 million in illegal fees.
Scammers are successful because they do their research. They are adept at targeting borrowers who are in significant financial distress and have difficulty understanding and navigating the student aid system. These consumers are particularly vulnerable to a pitch that promises rapid debt relief, especially if the pitch appears to come from a legitimate agency.
Unfortunately, it's just not that easy. Third party debt-relief companies can't accelerate the process regardless of any fees that you pay, nor can they do anything for you with respect to your student loan that you can't do for yourself for free.
If you are contacted by a debt-relief company promising student loan assistance, watch out for three major red flags:
1. Paying Upfront Fees – As mentioned above, it's illegal for companies to apply advance charges. Once scammers have your money, your odds of getting it back are greatly diminished.
2. Pressure Tactics – Scammers will always try to get you to agree to deals on the spot without giving you time to think about your options – or, more likely, to keep you from researching their company in greater detail.
3. Rapid Loan Forgiveness – Any company that promises rapid loan forgiveness is simply wrong. If you qualify for forgiveness under one of the Federal Student Aid programs, you can seek that forgiveness yourself in the proper timeframe – and no company has the means to speed up that process for you.
Don't be fooled by a simple Department of Education seal (which may be easily copied by scammers). In addition, don't give out your Federal Student Aid user name or password to anyone. Scammers can then access your account and your personal information.
It's tempting to believe there's a simple way out of student loan debt, and that third parties can offer fast loan forgiveness or similar quick solutions. Unfortunately, there's no simple way to remove student loan debt, just as there's no simple way to lose 50 pounds. Both take time, diligence, and a good supporting program.
As a general rule, your student loan relief should come from two places: your loan servicer and/or the Department of Education. Their assistance is free of charge.
Through the Federal Student Aid website, you can explore your available options for deferment, forgiveness, cancellation, and discharge – and if none of those apply, they can also direct you toward potential consolidation loans, income-based repayment plans, and other methods of easing your burden.
You're always free to pay a third party to help you reduce your student loan burden, just like you can pay somebody to help you lose 50 pounds, but are they providing any service you can't perform yourself? An even better question to ask – do they provide any value or are they simply attempting to profit from your situation? Make sure you thoroughly research any third-party assistance and fully understand the terms before any money changes hands.
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