4 Student Loan Scams to Watch Out For

There’s been a lot of recent buzz around the price of college education and no one seems to be able to escape the heat of tuition costs anymore. Adding fuel to the fire are scams that seek to exploit young borrowers. Which is why you should be aware of the prevalent scams that affect students applying for student loans and scholarships — as well as graduates who are in student loan repayment — and what you can do to make sure you don’t fall victim to them.

Scams to Watch Out for If You’re a New or Continuing Student

Are you just starting college? Applying for loans and scholarships for the first time can be an arduous and confusing process. Luckily, there are plenty of free resources available to help you.

FAFSA — this is the form you have to fill out to apply for federal aid (including loans and grants). Never access this anywhere else (including FAFSA.com, which is a known scam) and never pay anyone to fill it out for you. This form is free and if you need help filling it out, visit your school’s financial aid office. Need more help? Visit The Federal Student Aid page of The Department of Education’s website for information on how the FAFSA works.
Scholarships — just like your FAFSA form, don’t pay anyone to help you with scholarships. You can find a myriad of scholarship opportunities on Fastweb.com that range from scholarships for high GPAs, for people of a certain heritage, for those involved in specific extracurriculars, and more. Any website or person that wants to charge you, guarantee they can get you a scholarship, or asks for money to hold a scholarship is definitely a scammer.

Red Flags: Beware of anyone that charges a fee, guarantees a certain result or reward, asks for your financial information to “hold” a scholarship, pressures you to make a quick decision, claims to have an inside track on gaining a scholarship, won’t give you detailed information on what you’re applying for, claims you won a scholarship that you didn’t apply for, and anything that sounds too good to be true.

Scams to Watch Out for If You’re in Loan Repayment

Are you a college graduate? If so, now’s the time to start thinking about student loan consolidation. But how can you know that the consolidation you’re seeking is legitimate? Only get your information through trusted resources:

Federal Loans — These should be consolidated through The Federal Direct Program. This will lock in your interest rate and make available a variety of payment plan options based on your situation. There are even other programs like The Public Service Loan Forgiveness Program which were created to help those in specific career fields (such as public service fields like teachers, police officers, non-profit workers, and more) so talk to your lender to see what you’re eligible for.
Private Loans — You can consolidate private loans through your lender or shop for one with better rates. FinAid is a trustworthy place to find a comprehensive list of options and lenders. It is also possible to consolidate your loans by rolling them into a home loan or home equity line of credit, but of course that only works if you’re currently a homeowner.

Red Flags: Beware of any program that claims it will eliminate your six month grace period, claims they can discharge your debt quickly and easily, tells you that you can discharge your debt by sending a check to your lender with the memo line “For the Discharge of Debt”, or pressures you into a quick decision.

Once you find the right program and are all set to pay off your student loans, be sure to research how to get started on your payments and stay on track.