Student Loan Scam

Here are some ways to identify a scam by a student loan debt relief company:

They require you to pay up-front or monthly fees for help.
It’s illegal to charge an up-front fee for this type of service. If a company requires a fee before they 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.

They promise immediate and total loan forgiveness or cancellation.
No one can 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 don’t 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.

They ask for your username and password.
The U.S. Department of Education (ED), Federal Student Aid (FSA), and our partners will never ask you for your password. Your account username and password are used to sign legally binding documents electronically, and they have the same legal status as a written signature. Don’t give your password to anyone or allow anyone to create a username and password for you. If a company has access to your account information, they can make changes to your account without your permission.

They ask you to sign and submit a third-party authorization form or a power of attorney.
These are written agreements giving the third party legal permission to talk directly to your federal loan servicer and make decisions on your behalf. Debt relief companies often want these authorizations so they can change your account and contact information. As a result, you don’t realize that they aren’t paying your monthly student loan bill.

They claim that their offer is limited and encourage you to act immediately.
Student loan debt relief companies often try to instill a sense of urgency by citing “new laws” or discontinuing programs as a way to encourage borrowers to immediately contact them. While there are some deadlines you need to meet regarding your student loans—for example, if you’re paying under an income-driven repayment plan, you need to recertify annually—our programs are limited only by the eligibility requirements.

Their communications contain spelling and grammatical errors.
While many of the communications sent out by these companies look very formal (for example, fold-and-tear letters with safety patterns), they often contain spelling and grammatical errors. If you notice unusual capitalization, improper grammar, or incomplete sentences in the communication you receive, that’s likely a red flag that the company isn’t affiliated with ED.

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