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Scam Alert: Fake Settlement Offers

Student loan scammers are trying to trick borrowers into making a large payment to “settle” their debt. Several red flags make it clear these emails are not legitimate.

Written By: Michael P. Lux, Esq.

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Many people are receiving scam emails about settling their student loan debt.

The way the scam currently works is people receive a non-specific email from a Gmail account about settling their debt. The email offers to settle the debt in full for a Green Dot Money Pak voucher. Long after the funds have been transferred, do the unsuspecting borrowers realize that they have been the victim of fraud.

Borrowers need to be aware that scammers are sending out offers to settle student loan debt for a fraction of the actual balance. The reality is that settlement offers are very rare and normally only offered to severely delinquent borrowers.

Generally speaking, student loan scams work because borrowers desperately want the offer they receive to be true. This fake settlement scam is no different.

What gives this particular scam away?

Though student loan debt settlement is a real thing, especially in the case of defaulted or severely delinquent loans, lenders are not likely to contact you via email. As anyone who has fallen behind on their student loans knows, the preferred method of contact is the phone.

If lenders did wish to contact you via email, it would not be using a Gmail account. Instead, it would be an account that ended @salliemae.com or @wellsfargo.com. If the email is coming from a Ymail, Hotmail, or Gmail account; you can be certain it isn’t a real email from your lender.

The best way to flush out this scam is to log on to the lender’s website. Don’t make the mistake of following a link in the email. Instead, run a quick google search for the lender’s website. Call the number listed on the lender’s website to verify the contents of any questionable emails.

What to do if you receive a “settlement offer”?

If you are contacted by someone representing themselves to be your lender, do not give them any information about your account or loans. Instead, find out exactly what they want and why they are calling.

If they are calling about a private student loan, go to that lender’s website and give them a call. Explain what just happened and find out what is going on. If they are calling about a federal government loan, go to the federal government loan database, to look up the loan in question. The loan database will have contact information for the appropriate loan servicer. Once again, give them a call to find out if the offer you received is real or not.

How common is this type of fraud?

Given the growing number of student loan delinquencies and defaults, scams like this will probably continue to pop up. People are desperate to get rid of their student loan debt, and if you talk to a bunch of random people, it won’t be long until you come across someone who is behind on their student loans.

How do I avoid student loan fraud?

We have seen several different types of student loan fraud. Generally speaking, common sense is the best medicine. If anything ever seems too good to be true, it probably is.

If you are paying off your student loans, every penny is precious. If you ever find yourself in a situation that seems off, it is a good idea to take a step back and give it some thought. Discuss it with people you trust. Don’t let your student loan dilemma push you into becoming the victim of a scam.

If you want to go after the people behind the scam, the best bet is to file a complaint with the FTC.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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