I recently received two letters promising to provide me with “total student loan forgiveness,” lower interest rates, and $0 per month student loan payments. This raised the question of whether there were now student loan scams by mail to worry about.
The companies behind the letters did a good job making themselves appear to be legitimate. They knew my total federal balance and had my name and address. At first glance, it looked like legitimate student loan paperwork. Both of the letters were also full of red flags, though.
Sherpa Tip: Sometimes it is challenging to separate a scam from legitimate information.
For example, the recent major expansion of PSLF that requires some borrowers to consolidate might seem like a scam because it is both confusing and sounds too good to be true.
If you find verification on studentaid.gov or through your federal loan servicer, you can be certain it isn’t a scam.
The Red Flags – Signs the Letter Might be a Scam
No Company Name Listed – One of the letters didn’t have the company’s name listed at all. The fine print at the bottom used the term “The Company” without ever saying the name of the company. If someone wants your business, they should attach their name to it. If you can’t even look up the company name, it is because they don’t want you to.
Instructions to create your Federal Student Aid ID – One of the letters included instructions on creating my FSA ID. The only reason they would want me to create this ID is if they were going to ask for it. You should never share this information with anyone. According to the Department of Education:
“Your username and password are used to sign legally binding documents electronically. They have the same legal status as a written signature. Don’t give your password to anyone or allow anyone to create a username and password for you. If a company has access to your account username and password (FSA ID) information, they can make changes to your account without your permission.”
New Laws – This is another standard scammer tool. They announce a new law just put into place that only they know about. It is unlikely, however, that there is a new student loan law. If there was, you would know about it from watching the news, reading a newspaper, or visiting sites like this. If you cannot verify any new student loan law from a reputable source, the odds are very high that you are looking at a scam.
Document Preparation and Application Assistance – The fine print on both letters I received made it clear that the only thing they were actually doing was helping to submit applications or process paperwork. If I called them, I’m sure they would compare their efforts to having an accountant fill out a tax return. This is a scam.
These document preparation companies charge hundreds of dollars, hoping you won’t realize they’re just filling out a 20-minute form. They almost certainly will not offer helpful insight for any particular financial circumstance.
Important Deadline – If a letter mentions an important deadline on your student loans, be wary. Your loan servicer would inform you directly of any important deadlines for your student loans. If the first you hear about this “deadline” is from an advertisement or letter from an unknown company, there probably isn’t a real deadline at all.
If you get a letter and question its legitimacy – One somewhat effective method is to Google the company’s name. If they don’t have a name listed on the letter, you already know it isn’t legitimate. However, this method will not root out 100% of the bad apples because some of these companies are good at posting fake positive reviews and burying the very real complaints. The Consumer Financial Protection Bureau has some additional advice for evaluating these companies.
If you think they took or are about to take your money – If you have already gone down the rabbit hole and want to get your money back, it will be very tricky.
If you already paid them, demand they return your money. Inform them that you will be submitting a complaint to the Consumer Financial Protection Bureau and your state’s attorney general if it isn’t promptly returned. Over the years, we have found that law enforcement is good about pursuing these companies but often slow to respond, as they need time to build a case. These scammers go to great effort to stay off law enforcement’s radar. The threat of reporting their scam is the threat they are most likely to take seriously.
If you sent a check that has not cleared, you could put a stop payment on it. If they took payment via credit card, you could report the charge as a fraudulent charge to your credit card company.
Regardless of what happens with the scammer, keep a very close eye on your credit report. They will likely have enough information to commit identity fraud.
Getting Back at the Scammers
There is definitely a temptation to take action to put these shady people and businesses in their place.
Calling them to waste their time might seem satisfying, but in the end, you are just wasting your time and putting a bigger target on your back.
The step most likely to make a difference would be to file a complaint with the government. In most states, the attorney general is tasked with protecting consumers from fraud. If you file a complaint with your state’s attorney general, it can alert law enforcement to the fraudulent activity.
One person taking action usually won’t make a difference, but if enough people are willing to step up, it could prevent many others from becoming victims.
Bottom Line – Don’t Take Anything at Face Value
Student loans are scary, and they affect many people. For years scammers have been taking advantage of the student loan problem in the United States.
Generally, a good rule of thumb regarding student loans is to double-check everything you are told, regardless of the source. You might misunderstand something, a loan servicer might have told you something in error, or someone could be trying to take advantage of you.
Bottom line, if you think that a situation is sketchy – even if you’re unsure why – you should trust your judgment.
For additional information about student loan scams, read here.