Top 5 Student Loan Forgiveness Scams to Avoid

What's up, everybody? It's Megan from Student Loan Planner. And on this video, we're going to be talking about student loan scams. There are five that we'll talk about today that we can talk through and talk about how to recognize them and how to avoid them. And I've got two voicemails actually on my personal cell phone that I've got keyed up ready to play for us just to get us an idea of what is out there. But first, let's talk a little bit about why student loan scams exist. One is that paying off debt is a major concern for a lot of college postgraduate students. And, you know, student loan debt is a reality for a lot of people. Millions of people have student loan debt of some kind with varying balances, varying degrees and different professions. So it affects a lot of different people. And so, you know, it's a pain point for a lot of people how to navigate paying the loans off. And it does not help that student loan debt is, I think, the most complicated debt out there. Federal student loans have so many nuances that make it very confusing to know what's relevant to you, what's not relevant to you, what should you be paying attention to, especially with all the things going on right now with the COVID payment and interest freeze we have and the PSLF waiver that's come out. There's just so much information out there to where it's exhausting. And if you don't have a good handle on what your loan situation looks like or what your plan of action is, it can make you susceptible to maybe these scams that might sound too good to be true. But like some other things with student loan planning, there are things that sound too good to be true. It could sound too good to be true to get loans forgiven through public service loan forgiveness. So it's not outside of the realm to hear somebody talk about student loan forgiveness and feel like maybe they're legitimate. So we talked a little bit about why they exist. Let's actually listen to a voicemail that I have on my phone, which just for reference, I do not have student loan debt of my own. That's a story for a different day. But I don't, and I still get these phone calls on my personal cell phone. So I'm going to play one for you. Let me pull one up. All right. This is the first one. This number is from Ohio. I live in Georgia. Hello, this is Claire with the Student Loan Forgiveness Center. It's Thursday, February 24th. I just wanted to remind you that the government-offered surveillance programs are expiring soon. And if you're not enrolled in at least some of the program by the end of this event, you'll have to start making payments again towards the balance for your student loans. At this point, we haven't received any of the documents or information we requested. So if you're still interested, give us a call back at 301-902-0575 today before 6pm. Again, that number is 301-902-0575. Thank you, and I look forward to hearing from you. All right. So a couple of problematic things with this voicemail. One is we know now that I do not have student loans. So of course, that means I did not prompt any communication with whoever this is, Claire from Student Loan Forgiveness Center, which there is not a Student Loan Forgiveness Center that's going to be calling you. There's just not. Even if you're pursuing public service loan forgiveness, they're going to be calling you from Fed Loan Servicing. And it will be in regards to something that you have submitted to them, like an employment certification form or a consolidation application, something like that. You would have initiated contact with them. It goes on to say that they're reminding you about forbearance programs expiring, which that was true at the time. The payment and interest freeze was going to expire May 1st of 2022. That has actually been postponed again to August 31st, 2022, as of four hours ago. So payments are not going to be kicking in again for a while. So that's true. So they do harp on that kind of sense of urgency. And I could see someone who has not picked a repayment plan yet being a little freaked out about this, thinking, oh, my goodness, I've got to take care of this. Payments are kicking in. And then it goes on to talk about how if you don't contact them, that does mean that payments are kicking in. Well, bad news or good news, however you look at it, payments are going to kick back in at some point. We're going to have to start payments at some point unless they're sweeping forgiveness overall, which we are not thinking is going to happen, unfortunately. But regardless, payments are going to be kicking in. Any documentation you submit to this company is not going to stop that. So that's a little worrisome how they make it sound like if you contact them, they'll be able to stop your payments. That's not the case. But if you are in a situation where we don't have income or income has dramatically maybe decreased from what it was pre-COVID, there are ways to reduce your payment as low as zero dollars a month by applying for an income-driven plan to keep the payment proportionate to your income. So forbearance, I don't think is ever really the answer. It's something that allows interest to accrue while you're not required to make payments. So it keeps you in good standing on the loan, but it doesn't work towards any kind of forgiveness timeline. So income-driven repayment options do work towards forgiveness timelines. Forbearance does not. So that's a bad downside to forbearance and interest accrues. So it's making your loan more expensive as time goes on where if you just applied for an income-driven plan, maybe you could have a more affordable payment with better results with lower interest accrual or what have you. So lots of interesting things there. They also don't say my name at all. They don't know who I am. They didn't address me by my first or last name. So that's interesting. So with that said, with a good example, I think we could get into some of the five more common student loan scams that we see. So one of the first scams that I see, and I see a lot of people fall victim to this, is a student loan consolidation scam. And what this looks like is a company reaches out and promises that they can consolidate your loans. They'll do it for you. The paperwork is very complicated. It'll give you access to forgiveness programs. And that's about it. They charge a very large fee to do this. And they don't really talk you through the repayment options. They don't talk about the cons to consolidation. And that's really their one trick pony with that, really, at the end of the day. So the problems with this is, for one, consolidation is free. You can do this on your own through studentaid.gov. There's an online application you can complete. And for some folks, it makes sense. Consolidation is something that we have to do to take advantage of the PSLF waiver if we have the wrong loans. It's something we would need to do if we wanted to continue to pursue PSLF and have the correct loans going forward. So those are some good reasons to maybe consider it. Another reason would be right after college graduation, simplification could be nice. So combining all of our loans together at that time could be beneficial. That way, we have one payment, one company, one interest rate to deal with. And those are really some of the big positives. Simplification and correcting our loan codes into something that's eligible for PSLF or different repayment plans. Downsides to consolidation, though, is that it does erase payment history. So right now, during this PSLF waiver time, it does not erase PSLF payment history, but only up until October 31st, 2022. If you consolidate after that point, then that's not going to be the case. It will erase PSLF payment history, too, after that deadline. But for income-driven forgiveness, the longer-term forgiveness after 20 or 25 years, if we already have five years of credit and you go and consolidate your loans now for not really a good reason, then we've erased five years of credit and we're starting over. So that's a really big downside that needs to be talked about. And those companies don't talk about that downside. They also don't talk about how it doesn't improve your interest rate. Consolidation takes the weighted average of your existing interest rates and actually rounds up to the nearest one-eighth of a percent. So it doesn't make your interest rate better. And if they sell you on that saying that consolidation does, they're lying to you. Or they're getting consolidation confused with refinancing, which is taking the loans to a private company to reduce the interest rate. That's totally different. So how they are successful with this is they consolidate and they basically lie on your income-driven application about what your income is. Because what they do is they ask you for your login information. They log into your account. They complete your documents. They sign off on those documents as you. And if they don't and they print it out and send it to you to sign, you probably are not sure what you're signing. But oftentimes what I see happening with those situations is they're lying about your income or your family size to make your income-driven payment very low. And so people who aren't paying attention to this or looking at the documents, they think these companies are their heroes because their payments are really low compared to what they should have been probably. But they don't realize or maybe they don't want to realize that those companies are committing fraud and they're lying and putting the borrower, you, at risk for being fined or audited. And that is never going to be a good thing. So not a good thing. And these scammers, they charge very large fees. I think I mentioned that to do this, which is free. And they don't provide you any value. They do something pretty much illegal. And they don't provide you with any sound repayment planning guidance. So that's the first scam to be aware of. And honestly, probably the most common that I see. And that's their one trick is that they'll consolidate your loans for you, take care of all the paperwork, charge you a big fee to do it. And then they charge you some kind of reoccurring fee every year to file your recertification paperwork, which, again, you could do for free as well. It's not that complicated. You just have to take the time to sit down and do it. So that's number one. Now, the second scam that we see quite a bit, and we are seeing a lot more with this COVID forbearance environment we're in, is the student loan debt elimination scam. And so I've heard voicemails or seen transcripts of voicemails of people getting phone calls where kind of like the Student Loan Forgiveness Center, one that we just heard, but it makes it sound like student loan forgiveness is attainable for you right now. And you have to act on it. You have to give them a call, give them your information to be able to take advantage of this new forgiveness program. So a couple red flags with this is a student loan servicer or the Department of Education is not going to call you about this. You have to do your due diligence on your loan situation to know if you are eligible for the Public Service Loan Forgiveness Program or the PSLF waiver that's come out. So you're not going to get a call out of the blue. They're not going to do some audit of files just to review eligibility for this. They're not. What's interesting is the PSLF waiver, people are getting immediate loan forgiveness, but they had to have done an action beforehand, meaning they would have had to have submitted an employment certification form verifying their employment to be able to get some kind of correspondence back on that. So again, it has to be something where you've initiated something to get some kind of correspondence. And it's always a red flag if they don't know your name when they call you. They don't know anything about your debt. They're just calling kind of a cold call. So those are big red flags there. And again, there are instances where student loan forgiveness is real and can happen. Public Service Loan Forgiveness, the PSLF waiver, death and disability discharge, that's 100% of loan forgiveness. That's the fastest way to pay your loans off by dying or being disabled, but I don't recommend either one of those routes. And then there's the income-driven forgiveness route. Sorry, bad joke. But the income-driven longer-term forgiveness route, that's a way to go. So very legitimate ways, but the quick, I can do this right now for you kind of thing is likely going to be a scam. So number three is some kind of advance fees scam. And this is where they promise to be able to negotiate a lower interest rate for you or negotiate a lower repayment plan for you. But they charge you an upfront fee to do that. So they say, hey, fee, pay me $1,000. I can negotiate your student loan payment down for you. Sometimes they ask for your login information to your servicer, kind of like that other scam we talked about. But this is problematic because with federal student loans, there is no negotiating with what your payment is going to be. There's no negotiating with settling your balance. That's just not an option with federal student loans. That could potentially be an option in very specific circumstances with private student loans that are in default. That is not private student loans that are in good standing or not without an attorney is what I would generally say. So this is not an easy feat, even if they're private student loans, but generally not possible with federal student loans. There are a specific set of repayment options you can choose from with federal loans. There's no negotiating there. So that's a red flag in and of itself. There's no negotiating that someone can do for you. And the scammers that are calling you about this likely don't know the technicalities of your loan situation anyways. So you could play with them and ask them what they know about you or what they know about your loans and see how far they go before they hang up. So let's talk about the fourth, which is a lawsuit scam. This I've seen as well more recently because of the Navient lawsuit that happened in more recently in end of 2021, early 2022. So let's say you get a phone call or an email from a law firm that's claiming that they can settle your whole student loan balance. And this lawyer will ask for money to take care of this for you, suggesting that they can save you thousands of dollars in the process to settle. They might ask you to pay monthly payments too. So it might not just be a lump sum thing, but they might ask you to pay them monthly to try to do this. Now, there are such things as class action lawsuits that you could be a part of. But unless you're one of the main folks in that class action, you're not going to be paying somebody. And actually, I don't think anyone pays for these class action lawsuits. I think they only get paid when they win. So this is not a circumstance where, again, someone should be reaching out to you to talk about your ability to take advantage of some kind of settlement through a lawsuit. So this is something that is problematic as well. It's settling your debt like we talked about in the fourth scam. It's not something that is easily done. It can be done properly with an attorney, most likely not with federal loans, but maybe with private loans. But it is going to cost you thousands of legal fees. There's going to be a whole legal strategy accompanying with this. It's not an easy feat. So anyone who makes it sound like it is or that all you have to do is pay them X amount and they'll take care of it, that's not legitimate. And then the last scam that we see a lot of is student loan forgiveness scams. So again, this is similar to, what was the other one? The debt elimination scam we talked about. But forgiveness is another term. So elimination, settlement, discharge, negotiation, forgiveness, those terms are red flags. And again, if you have not initiated any kind of forgiveness opportunity, like we haven't submitted employment documentation for PSLF, or we're not working in public service in general, we're not on an income-driven plan, these forgiveness opportunities that scammers are making it sound like you have access to, there's no new programs out there that someone would be calling you about. These are something to stray away from. So hopefully this is helpful. I think some other big red flags to maybe look out for or to avoid. High-pressure sales tactics. You should never feel pressured to give somebody money to help you with your student loans. Our company, we of course work with folks one-on-one for student loan consultations. I'm not going to be getting on the phone with you and convincing you to hire me to do your student loan plan. I'm just not. There's plenty of free content on our website to help yourself for free without any guidance from us. If you feel like your situation needs some additional attention or you want an expert to review, you hire us, you make that decision. High-pressure sales tactics are a big red flag because that means there's just a lot of red flags there. Another red flag is just the business only offers loan consolidation. No other options. They can't explain to you why repay is a better plan for you than income-based repayment. They don't know the differences between. That is a huge red flag. That's a red flag I think in general with the financial professional who says they can help you with student loans. If they can't articulate your repayment options, all the options you have available to you, and hone in on what the most optimal plan is for you and why you don't feel like they can explain to you very well why they're recommending something, that's a red flag. I think a good easy way to figure out if someone is qualified to give you student loan advice first is if they have a certified student loan professional designation or CSLP for short. That is a surefire way to know if someone is educated in the student loan repayment planning space. Also, we recommend CFPs or certified financial planners. That is one of the highest financial planning designations out there. They may not still be specialized in student loan planning, but they will at least know that they're not. They'll be able to refer you maybe to somebody who is. Those are some things to be on the lookout for. Other red flags, use of verbiage like document preparation service. That's a big red flag. That just means that they prepare the documents that you can do for free on your own. We have plenty of blog posts about how to do recertification or how to do a consolidation application or how to submit your employment certification form. All of those things you can do for free and don't put you at risk of fraud or someone lying on your documents without you knowing. Then another red flag we talked about is just providing sensitive information. Never, ever, ever, ever give somebody your username and password to your studentaid.gov account or to your service or website. Never a third party, never an advisor. You want to be in control of what happens to your student loan account. You don't want something to come about that you're not sure how happened. You want to be the only one who could have had access to that account. I think those are some big, I'm just skimming through to see if there's any others. Then maybe another one, any official sounding names and logos that make them seem connected or part of the federal government. This is a really big red flag, but it's pretty quick to maybe tell if you pay attention. Anything like Student Loan Forgiveness Center, that makes it sound like they're legitimate, kind of, but if they don't have the Department of Education logo on your document or on the email or on their website, so all the servicers that manage federal loans have to have that logo and have to have the disclosure at the bottom that says that they're an official Department of Education loan servicer. Those are things to look out for. If a company doesn't have those things on their website and they're saying that they do or they're saying that they are affiliated with the Department of Education, then that is a huge red flag. Hopefully this is helpful. Hopefully this helps you identify what things to look out for, what red flags to be aware of. Go with your gut too. I think sometimes that tells you everything you need to know. If you don't feel good about a conversation, hang up or stop responding to the email and call your student loan servicer directly. If you feel like maybe there is something you need to be paying attention to, hang up, call the number that's on your statement, make sure that that's legitimate, and I think those are some good ways to just make sure you don't fall victim to any student loan scams. If this helped you, if this could help a friend, or if you know someone who's asked you about a voicemail they got about student loans recently, send this over to them. Maybe it'll help. Also, like and share, like and subscribe. That'll help reach other folks that might find this information helpful. Thanks for hanging out with me on this video, and I will see you in the next one.