Legitimate Student Loan Companies vs. Scams

Michael Lux Blog, Scam Alert, Student Loans 0 Comments

Seeing the difference between a valid student loan company that provides a useful service and a scam is not an easy task.  In 2017 it is pretty easy for a scammer to create a company that looks fairly reputable.  Building a website that looks legitimate is pretty easy, and trusted companies like Facebook, Twitter and Google are often guilty of running advertisements for less than reputable businesses.  Add a 1-800 number and some crafty salesman, and consumers could be in trouble.

Counting on the government to shut down these operations is also a mistake.  While some government agencies have done an excellent job identifying and shutting down scammers, they are forced to react.  It is only when people have become victims that the government usually gets involved.  By this point some of the more clever scammers have moved on to the next scheme.

Today we will take a looks at services that may be advertised and examine whether the promises are valid or potentially dangerous.

Student Loan Forgiveness

This is a very real program offered by the federal government, but it is also something that many scammers claim to provide.  As a result it can be difficult to separate the real from the fake.

The easiest way is to find out whether or not the program costs any many.  If there is a one time fee, a monthly fee, or any processing fees… it is probably a scam.  The government student loan forgiveness programs are free of charge and can be done through your student loan servicer.  There is no reason to pay anyone to “help” you with the process and anybody who claims a special relationship with the Department of Education is lying.

Another trick to keep in mind if you are evaluating the validity of a student loan forgiveness claim is to look at the urgency created.  Many scammers are skilled salesman that will try to convince you that right now is the best time or even the only time to get started.  Such urgency does not exist within the world of valid student loan services.  If a program were disappearing, you would be able to read about it on many trusted media outlets.  If someone can’t back up their claims of urgency, they probably cannot be trusted.

Student Loan Consolidation and Refinancing

This one can get pretty tricky.  There are many companies advertising student loan consolidation and refinancing services and while many are legitimate, many are not.  This gets complicated by the fact that many companies providing this service are relatively new.  For example, SoFi, arguably the biggest consolidation company, was created in 2011.  As a result, name recognition probably isn’t the best indicator.

On the other side of the coin we have companies that advertise consolidation of your federal student loans, but all they are really doing is signing you up for a free federal student loan consolidation.  This is a free service provided by the government, but it doesn’t actually lower your student loan interest rate (though there are other advantages to federal direct consolidation).  When third parties advertise this service, they are trying to charge you for a free program… the classic student loan scam.

The most efficient way to eliminate the valid from the scammers is probably to google any company that you are looking at working with.  If you see 100% positive reviews, it is probably a red flag.  Legitimate student loan consolidation and refinancing companies have to reject applicants that don’t meet certain credit or income requirements.  Rejected applications anger consumers and lead to negative reviews and comments, but it is also a great sign of a company operating under normal business practices.  Also look at the nature of the reviews, if people are unhappy with the customer service, it could be a normal complaint of a valid company… if people are saying it is a scam, you may want to find out why.

We have compiled a list of many of the larger lenders and reviewed their services.  This list is far from exhaustive, but it does include all of the major lenders offering student loan consolidation and refinancing services.

Zero dollar per month student loan payments

Here again we start with a valid government program, but run into scammers who try to claim it as their own service in order to take advantage of consumers.

Federal student loans do have income driven repayment plans.  If your income is below a certain level, or if you don’t have any income, your monthly payment could actually be $0.  It is also possible that your loan could eventually be forgiven.  This is something that you can do directly with your student loan servicer and it requires not expertise or special knowledge.

If you see income driven payments being advertised, odds are pretty good that it is not legitimate.  The customer service representatives should be trained to tell borrowers about this option, but loan servicers and the federal government are not going to spend money advertising these options.  There is not incentive.  If you see an advertisement for the program, somebody is probably trying to sell you something, and odds are good you don’t want to buy it.

Ask for help

There are a number of different resources out there to help you evaluate these companies.  Use them!  We are always happy to help, but this site is just one of many that you can consult to get your questions answered.