“I LOVE my student loan debt,” said no one, ever. Not only can student loan repayment be difficult to understand, it can crush your budget, and whenever there’s confusion and desperation, there’s someone trying to make money off it.
There are a handful of legitimate ways you can make your student loan payments more affordable, but it’s very likely you’ll come across student loan scams if you’re researching repayment options. These scams vary widely — some are looking to steal your personal or financial information, while others are trying to profit from high fees or misleading claims. Here are some red flags you need to watch out for.
1. It’s Too Good to Be True
The age-old scam identifier holds true for student loans: If it’s too good to be true, it is. Some common scams include terms like “instant forgiveness” or that you’re “pre-qualified” for lower loan payments, said Matt Ribe, senior director of legislative affairs and corporate secretary for the National Foundation for Credit Counseling. A company can’t know if you’re qualified for federal student loan programs like income-based repayment (IBR) or public service student loan forgiveness unless they’ve assessed your student loans and your personal financial situation. Ribe said to watch out for any broad, blanket guarantees that a company can get you a particular outcome — it’s really not that simple.
2. They Charge High, Upfront Fees
It doesn’t cost anything to apply for federal repayment or forgiveness programs (IBR, public service student loan forgiveness, revised Pay As You Earn aka RePAYE, etc.). You can do that through your student loan servicer (talking to your servicer is always free, too).
There are a lot of companies out there that charge fees for helping you apply for such programs.
“We pay people to fix our cars and prepare our taxes all the time; there’s nothing inherently wrong about that,” Ribe said. “It’s the misleading advertising that really irks consumer protection folks and the Department of Education, for sure.”
Joshua R.I. Cohen, a student loan lawyer in Vermont and Connecticut, said he’s seen student loan scams offer consumers “relief” and charge upfront fees between about $300 to $2,000. The company may not clearly explain what the fees are for — people often confuse monthly maintenance fees with their actual student loan payments — or they might just take your money and run. Your loans may not even qualify for a federal repayment program (private student loans don’t), but they’ll charge you a consulting fee anyway.
3. They Say ‘You Have To’
Any company that demands a specific form of payment (often paired with high-pressure sales tactics like, “This offer will expire at the end of the year!”), should make you suspicious, Cohen said.
You’ll also want to be wary of an offer that tells you how you should handle your loans, because it’s up to you to decide what makes most sense for your finances. For example, you generally do not need to consolidate your loans to qualify for IBR (except for Federal Perkins Loans, which must be consolidated to qualify for IBR).
“The scam company doesn’t say why you need to consolidate they just say, ‘Oh you need to do this,’” Cohen said.
4. ‘The New Obama Student Loan Relief Program’
Both Cohen and Ribe cited this one. You may have even seen ads for it online.
They say something like, “‘By consolidating you can qualify for the Obama Loan Forgiveness Program’ — there is no Obama Loan Forgiveness Program,” Cohen said.
Falling for this one may mean you pay a fee or you end up “consolidating” into a loan with murky terms and a high interest rate — all for a program that doesn’t exist.
Also watch out for companies claiming to be affiliated with the government or the Education Department — only student loan servicers and debt collectors work directly with the government.
5. They Want to Take Control of Your Loan
Cohen and Ribe said there’s no reason to pay your loan through a third party. Scam companies have been known to ask for your Federal Student Aid ID (FSA ID) or your National Student Loan Data System (NSLDS) PIN. This is personally identifying information that can allow a third party to take control of your loan.
“You don’t know what the company is actually doing, (or) if they’re actually forwarding the money onto the servicer,” Ribe said. The company may also change your contact information on your student loans, so you won’t know if you miss payments or default.
Why You Need to Be Careful With Student Loan Repayment
Paying your student loans on time can help you build credit, but if you fall behind or don’t understand how repayment works, you could end up with some serious credit and general financial problems. You can learn what happens exactly after you default on your student loans here.
If you ever have questions about your student loan payments, you can ask your student loan servicer for guidance. The Education Department, the Consumer Financial Protection Bureau and local consumer advocates (like a student loan lawyer or a non-profit credit counselor) are also good sources.
This article originally appeared on Credit.com and was written by Christine DiGangi.