It is no secret that student loan debt in the United States is out of control. According to the Consumer Financial Protection Bureau, there is $1.2 trillion in outstanding student loan debt, and the figure is growing. Worse, roughly seven million debtors are now in arrears.
Unfortunately, this difficult structure creates an opportunity for student loan scammers to prey on individuals seeking student loan debt relief, such as new college grads or those unable to make monthly payments.
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Here are some of the most typical forms of student loan scams, as well as ways to prevent being left holding the bag:
You can “pay” your way out. Provided an organisation suggests it can cure your loan default if you pay first, go away. If you find yourself in default, the best thing to do is to contact your lender immediately. Lenders are compelled by federal law to assist you in determining a remedy, such as consolidation or rehabilitation. There should be no cost to investigate these student debt reduction programmes.
In exchange for a cheaper rate, there is a one-time cost. Many borrowers are so concerned with reducing student loan debt that they fail to consider the options made to them. If a lender or loan representative asks you to pay him or her up advance in order to lower your interest rate, just refuse. Legitimate lenders do not impose upfront costs; instead, they take a percentage once the loan is finalised, so you pay nothing out of pocket.
You must pay to get your debt dismissed. If only it were that simple. Outside of a few approved causes (e.g., your school goes out of business), student debts are seldom erased, but there are various student loan relief scammers that claim to have the secret elixir for making it happen. The typical consequence is bad news for you—with a cost, of course.
Debt-relief schemes that are entirely fictitious. One Illinois firm offered clients a debt solution by enrolling in the “Obama Forgiveness Program.” Unfortunately for those clients, such a student debt forgiveness scheme does not exist, and the Illinois Attorney General is now intervening. This is the first case of its sort against student loan scammers, but as opportunists continue to prey on confused and scared students, we may anticipate more.
Change your account information/contact information. Prepare to walk away if a lender seeks to “take over” your loan, whether by altering contact information or requesting power of attorney. It’s your loan, and you must be the main point of contact—how else would you know if anything suspicious is going on with it? Furthermore, some firms may seek to “take” your loan and begin pestering you if you are unable to pay or satisfy their requirements.
Consolidation of Student Loans
Student debt consolidation is one option offered to certain borrowers. If you have several federal school loans, you may simplify loan repayment by consolidating numerous loan instalments into one, potentially decreasing your monthly payments and prolonging the time it takes to pay off the loan. While this is a solution that you can control via the Federal Direct Consolidation Program, there may be advantages and disadvantages that you should carefully consider. Working with a debt consolidation business may be beneficial, but there will be a price for the service. Just make sure you comprehend the service being provided, that they are a trustworthy organisation, and that you are not scared to shop about.
At the end of the day, it’s critical to conduct your homework on any firm you wish to do business with about your student loans. What are people saying about the company on the internet? Is there a Better Business Bureau listing? Those who have had a poor experience with a firm will often submit a review or blog about it, so you may as well learn from someone else’s mistake.
There are several developments taking place in the student loan industry, including new legislation from Washington that is attempting to assist borrowers in various ways. As a result, businesses claiming to assist residents with student debt payments are springing up.
The finest piece of advise is to utilise your common sense. Think logically about each firm you come across or any appealing offer you are provided with. If anything seems too good to be true, it usually is (as the adage goes).