If you have student loan debt, you might receive calls or see targeted social media ads promising to help reduce, or even eliminate, your balance — for a fee.
The problem is, many of these offers are fraudulent, in some cases the companies trick people into paying fees, but don’t put any of that money toward the loans themselves. Other companies operate legally, but charge for completing simple paperwork that you could just as easily do yourself.
It doesn’t help that the student loan landscape keeps changing at a rapid pace. As repayment rules shift and the Trump administration reduces oversight of the student loan system, these companies see an opportunity to capitalize on borrowers’ confusion, experts say.
The Hechinger Report talked to student loan experts to find out what borrowers should know about loan forgiveness and repayment — and how to spot a scam.
What red flags indicate an offer to help with loans might be a scam?
Watch out for companies asking for your student loan password or verification code so they can confirm your information. Fraudsters often use such access to lock borrowers out of their own loan portals or make changes without the borrower’s knowledge.
Some scammers secretly reset the borrower’s password while on the phone. They log into the borrower’s account and request a password change, which will send a two-factor authentication code to the borrower. The scammer, meanwhile, will say something like, “We’re going to send you a code to verify your identity,” and ask the borrower to share it.
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If you receive a call from a company promising a generous loan repayment program that you must enroll in today because it’s about to end, beware. Authorized repayment programs don’t use high-pressure tactics, experts say.
And be wary of promises that seem too good to be true. Some companies guarantee they will get your loan forgiven — but experts say that’s not a promise any legitimate company can deliver on.
You should also be skeptical of any pitch that charges for student loan help. Borrowers can access all of the benefits of the federal student loan program for free.
What should I do if I’ve fallen for a scam?
If you signed up for something and realize it may be fraudulent, you’ll want to make a couple of phone calls. First, contact the Department of Education and your loan servicer and revoke any authorization you granted to a third party related to your loan. Call your bank and disable any recurring payment you set up. If you shared your password, change it immediately.
You should report the incident to the Federal Trade Commission using this form, and to the Consumer Financial Protection Bureau online or at 855-411-2372. It’s also a good idea to let your state attorney general’s office know.
Are document prep companies a legitimate way to handle student loan repayment?
Some companies will charge an up-front fee of hundreds of dollars and then a monthly fee to enroll you in a loan repayment plan and maintain that status. These companies sometimes liken themselves to tax prep companies, helping you navigate government paperwork.
But experts say that the amount of work it will take you to provide them with the information they need is the same as it would be to fill out the forms yourself.
What are my official options for reducing student loan payments or getting loans forgiven?
If your student loan payments are too high to manage, there are ways to reduce monthly installments and even limit the amount you’ll have to pay off. The federal government offers several plans, including income-based repayment options that cap payments at 10 to 15 percent of your income. After 20 to 25 years, depending on the plan, any remaining balance is forgiven.
There is also a program for public service employees, like teachers, that forgives any remaining balance after 10 years.
The Department of Education offers an online simulator to help borrowers sort through their options. Experts also recommend using an online calculator by the Education Debt Consumer Assistance Program to explore your options.
I was enrolled in the SAVE plan, and I heard that it was recently eliminated. What now?
In March, a federal judge issued a ruling that effectively ended the SAVE plan, a Biden-era income-driven repayment program. The 7.5 million borrowers enrolled in SAVE now must switch to another plan, and if they don’t, the government will choose one for them.
Importantly, if your participation in the SAVE plan allowed you to pause payments on your loan, you now have to start paying again.
If you were in the SAVE program, you will receive notice from the federal Department of Education in July that you need to switch plans. The note might refer to SAVE as an “illegal” program, as the department has said repeatedly, but you did nothing wrong if you enrolled in this program when it was available.
Where can I go if I have specific questions about my student loan?
The best first stop is studentaid.gov, experts say. Your loan servicer, the company that manages your loan, is also a good source.
Bonnie Latreille, student loan ombudsman at the Department of Education’s Federal Student Aid office during the Biden administration, recommends being aware of other free options, as well, including experts at nonprofit organizations. One group to try is the Institute of Student Loan Advisors, which says it helps 20,000 student loan borrowers each year.
“Borrowers should never, ever pay for help with their student loans,” Latreille said.
This story about student loan forgiveness scams was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for our higher education newsletter. Listen to our higher education podcast.
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