Student Loan Forgiveness Scams
Student loan forgiveness is the hottest topic in the student loan industry. It makes sense that scammers will try to make money off of unsuspecting borrowers by offering quick and easy student loan forgiveness.
There are many different ways to qualify for student loan forgiveness based on your situation, your career path, your place of employment and other factors. But, to be clear, none of those student loan forgiveness programs are easy or fast.
Public Service Loan Forgiveness , for example, takes 10 years of qualifying loan payments before you can apply. Other student loan forgiveness options could take between 20 and 25 years. Loan forgiveness is not a quick and easy process. And any business that claims anything otherwise is probably a fraud.
Scammers do their best to make their ads, commercials, videos and websites look as official as possible. Be sure to investigate companies making any of these claims before handing over your money to them.
What If Youre Already A Victim Of A Debt Relief Scam
Dont panic. Change the passwords to your accounts so the company can no longer log in. Contact your loan servicer to remove any power of attorney documents in your file. Revoking power of attorney will take away their ability to make decisions for you.
If possible, order a stop payment on checks or wire transactions and dispute credit card purchases with the fraudsters.
There Are Legitimate Ways To Get Student Loan Forgiveness And Loan Counseling
If you cant afford your student loan payments and need help, there are legitimate ways to reduce your payments or pursue loan forgiveness. Some potential options include:
- Signing up for an income-based repayment plan to reduce your payments
- Exploring forgiveness options with the help of your servicer
- Consolidating your federal student loans into a Direct Consolidation Loan to extend your repayment term up to 30 years
- Refinancing to possibly get a lower interest rate and reduce your overall costs or to extend your repayment term for a lower monthly payment
- Seeking student loan debt counseling through a trusted organization, such as the National Foundation for Credit Counseling
Be sure to thoroughly research your options so you can make an informed decision on how to handle your student loans.
If you decide to refinance student loans, remember to shop around and compare as many lenders as you can. This way, you can find a loan that fits your needs. Credible makes this easy you can see your prequalified rates from multiple, reputable lenders in two minutes.
Just keep in mind that if you refinance federal student loans, youll lose access to federal benefits and protections. This includes access to income-driven repayment plans and student loan forgiveness programs.
Find out if refinancing is right for you
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Your Guide To Canada Student Loan Forgiveness
Student loan debt is a big problem in Canada, and its not going away any time soon. The average new graduate is carrying $28,000 in student loan debt. Pair that with high housing costs and low wages, and its no surprise that most millennials are putting off major life milestones because they simply cant afford it.
There is a small glimmer of hope for those struggling with provincial and federal student loans, and it comes in the form of student loan forgiveness. I took advantage of New Brunswick student loan forgiveness when I wiped out $16,000 of my $42,000 in student loan debt. Without that loan forgiveness program and others like it, theres no way I could have paid off $38,000 in two years.
If youre one of the many young Canadians dealing with high student loan debt, Ive put together a list of possible resources for you to tap to reduce your debt burden. Before you jump to your province and start going click happy, there are a few things you should know:
First, most of these programs are only for publicly funded student loans. If you have loans through a private lender, skip to the bottom of this blog post for additional resources.
Second, every province has a repayment assistance program . A RAP is there if you cant make your minimum student loan payments. Its not student loan forgiveness, its just there to help you if you are having trouble earning enough money to make your minimum payments. Ive listed a few of them below.
Revised Pay As You Earn
- Direct Subsidized and Unsubsidized Loans regardless of when borrower first obtained the loans
- Direct PLUS Loans made to students regardless of when the borrower first obtained the loans
- Direct Consolidation Loans regardless of when the borrower first consolidated the loans
- Payments change based on the borrowers income
- Maximum monthly payments are 10% of discretionary income and could be more than the 10 year Standard Repayment Plan.
- Any borrower with eligible federal student loans can make payments under this plan
- The loans must be in good standing to qualify
- No income requirement to enter plan
- The borrower must provide supporting documentation of income and family size to the loan servicer every year
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Companies The Department Of Education Works With
The ED works with various lenders, servicers, and private collection agencies to handle its workload. But its important to know which ones are legitimate. The ED maintains a list of its loan servicers as well as its private collection agencies. If the company that contacts you isn’t on one of these lists, its likely a scammer.
For federal loans not owned by the ED, heres who you should contact:
- FFEL Program loans Contact your servicer. If youre not sure who your servicer is, look at your most recent billing statement.
- Federal Perkins Loans Contact the school where you received your loans. Keep in mind that your school may be the servicer for your loan.
- HEAL Program loans Contact your loan servicer with the information it provided you for help with account-related questions. Contact details will be on your most recent billing statement.
Advocates And Borrowers Aren’t Satisfied With Biden’s Actions So Far
While many Republicans have resisted calls for debt cancellation, many Democrats and advocates for student loan relief are growing restless. To them, Biden’s $12.7 billion in debt relief so far is a rounding error, considering that nearly 46 million Americans have $1.6 trillion in federal student loans. And he campaigned on doing more again, $10,000 per borrower.
“That was a pretty clear promise that he made during the campaign,” says Persis Yu, policy director at the Student Borrower Protection Center. “And certainly, that is a promise that I think many borrowers are right now waiting for him to fulfill.”
Yu also says keeping that promise would make a huge difference, especially for borrowers already in default. “Roughly 16 million borrowers would have their entire debts extinguished, and that amounts to roughly two-thirds of the borrowers who are in default.”
“Crumbs’ worth of action.” That’s how Jalil Mustaffa Bishop describes the Biden administration’s efforts thus far. The assistant professor at Villanova University studies inequities in higher education.
In June, borrower advocates erected signs in front of the White House calling on President Biden to cancel student debt.hide caption
Two-thirds of respondents to Mustaffa Bishop’s survey said, in hindsight, they regretted having taken out student loans.
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How To Spot A Student Loan Scam
If you are unsure if a student loan assistance offer is legitimate, check for the following red flags. Does the program:
- Make promises of immediate or fast debt forgiveness or cancellation, or a looming deadline?
- Request upfront fees to apply for loan programs through the Department of Education?
- Claim that the program is affiliated with the government or Department of Education, but is not part of a government agency nor an official loan servicer listed on StudentLoans.gov?
- Request the borrowers FSA ID?
If any of the above statements are true, the offer is likely a scam and may be reported to the Office of the Attorney General.
It is important to make sure you are still receiving loan correspondence. Unscrupulous scammers may change your contact information on file with your lender to their own, so that their business, rather than you, receives all loan correspondence. Just because correspondence has an official-looking seal does not make the program legitimate. Do your research!
If you have concerns you may be a victim of a student loan assistance scam in regard to your federal student loans, contact the Department of Education or your lender directly to check the status of your student loans and to ensure that the information on your account is correct.
How Do I Get Student Loan Forgiveness If I Dont Qualify Under Bidens Student Loan Forgiveness
There are several ways to qualify for student loan forgiveness. . Among other student loan forgiveness programs, two popular choices are through either the Public Service Loan Forgiveness program or an income-driven repayment plan. Neither of these programs offer upfront student loan cancellation, so be prepared to wait several years. You can get federal student loan forgiveness through the Public Service Loan Forgiveness program after making 120 monthly student loan payments and meeting other requirements. You can get federal student loan forgiveness through an income-driven repayment plan such as IBR, PAYE, REPAYE and ICR after 20 years or 25 years .
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Default Federal Student Loans
Most federal student loans go into default after nine months of non-payment. You may face the following consequences if you default on your federal education loans:
- Your unpaid loan balance and accrued interest are immediately due and payable.
- You will no longer be eligible for deferment or forbearance.
- You cannot receive new federal student aid while an existing federal student loan is in default.
- Your loan may be assigned to debt collector for collection.
- You may be sued to recover the debt.
- Your wages can be garnished. .
- You can lose your tax refunds .
- Your credit may be negatively impacted.
- For certain loans, the Department of Education may require you to make payments under the Income-Based Repayment plan or Income Contingent Repayment plan.
You have rights under New York State and federal law when dealing with debt collectors. Contact DFS if you believe that a debt collector has violated the law.
How Does Forgiveness Work
Loan forgiveness is the last step in the trick. The big reveal. The disappearance of a coin, or in this case, a student loan balance.
Just like some of the most famous magic tricks, most of the work is done behind the curtain. You set up the trick by filling out your paperwork, and if you did it all correctly and you meet all the requirements, your student loans disappear.
They say a magician never reveals his secrets, but were going to risk breaking that rule with student loan forgiveness. There are many ways to get your loans forgiven, but they all come with their own requirements.
Perhaps the most well-known is the Public Service Loan Forgiveness program that has been in the news a lot lately. It was created in 2007 and to-date, we’ve seen 16,000 people receive loan forgiveness .
However, it hasn’t been all roses – in fact, only 98% of people that apply for PSLF get approved.
Other types of forgiveness result from life events that are beyond our control, like the death or disability of the borrower.
Heres a brief overview of student loan forgiveness programs:
- Public Service Loan Forgiveness
For other more situational ways to get your loans forgiven, see The Top Ways to Get Student Loan Forgiveness.
If you happen to be approved for loan forgiveness, even loans in default will be forgiven and the default status will be removed.
That also means that if any balance is forgiven, it is taxed as income. So you dont get the full benefit of a forgiveness program.
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Federal Student Loan Interest Rates
Interest rates vary by type of federal loan. The following table shows applicable interest rates for each type of federal loan:
Lowest Interest Rates
Direct Subsidized Loans
Direct Unsubsidized Loans
Fixed at 5.28%
Fixed at 6.28%
Some federal student loans also have origination fees, which are paid proportionately from each loan disbursement.
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How To Get Federal Student Loan Relief
Federal student loan relief has been extended through Jan. 31, 2022. A few ways to get relief include:
- Forbearance The federal government has extended the suspension of student loan payments through at least Jan. 31, 2022. You can still make full or partial payments on your student loans or make interest-only payments during this time.
- 0% interest All U.S. Department of Education student loans have zero interest through at least Jan. 31, 2022.
- Refunds Payments made from March 13, 2020, through Jan. 31, 2022, can be refunded. Reach out to your loan servicer for details.
- PSLF credit If youre a Direct Loan borrower who works full-time for a qualifying employer during the payment suspension period, you can receive credit toward PSLF . If youre on an income-driven repayment plan , your suspended payments will count toward IDR forgiveness.
Free Repayment Options And Loan Consolidation
Likewise, legitimate services exist to help borrowers evaluate their student loan repayment options and apply for the program that best suits their needs. It is possible to make costly mistakes when repaying your student loans.
But to avoid getting scammed, its important to know that paying to apply for deferment, forbearance, or a different repayment plan is optional. Neither the federal government nor the private companies that service on student loans charge borrowers money to request different loan terms.
The same is true of federal student loan consolidation. You can complete and submit the student loan consolidation application yourself for free. Private student loan consolidation does not exist, but you may be able to combine several private student loans into one and lower your interest rate, with a refinance.
Any loan fees associated with refinancing will not be charged until your loan is finalized and are usually deducted automatically from your loan proceeds. You dont have to pay anything upfront.
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Uses Names And Seals That Seem Official
Companies may use names, seals, and logos that suggest they are affiliated with the Department of Education or other government entities or programs. Companies may say or imply that they have access to certain special repayment plans or forgiveness programs they dont. The Department of Education has tons of good information on their approved contracted servicers.
Why Do Student Loan Scams Exist
Paying off student loan debt is a major concern for most college graduates, no matter how much debt they have after finishing school.
Like for any pain point consumers have, there are legitimate businesses that provide relief and illegitimate operations that seek to take advantage of borrowers looking for a solution.
And because the student loan debt relief industry isnt highly regulated, student loan scammers have an open door through which to prey on unknowing borrowers.
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Next Steps: Finding Legitimate Student Loan Relief Resources
If you need assistance with your student loans, help may be available. You may even be able to get it for free if you look in the right places. Start by talking to your loan servicer to see what options may be available, such as loan deferment and forbearance.
If youre not sure who your loan servicer is, you can find out by logging into your Federal Student Aid account or calling the Federal Student Aid Information Centerat 1-800-433-3243. If you have a private student loan, contact your lender to see what relief options are available.
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Scam #: Getting Loans Forgiven Cancelled Discharged Reduced Or Eliminated For A Fee
Who wouldnt love to have their debt erased? Unfortunately, the reality is that when you borrow money, you almost always have to repay it in full with interest. Even if you die, your estate may have to repay your debt before any assets you left behind can be distributed to your heirs.
Between the way that borrowing laws and tax laws are written, its safe to assume that if a company promises to negotiate a student loan debt settlement on your behalf, its a scam. If they say they can help you get your student loans discharged in bankruptcy, dont believe it. They also cant get your debt eliminated by representing you in a lawsuit against your student loan company.
Scams in this area typically involve telling the borrower that if they pay a large sum to some company, the company will get their loan discharged. In some cases, they might tell the borrower to send their student loan payments directly to the company instead of to their student loan servicer.
Either way, the result is likely to be that the company takes the borrowers money and the borrower falls behind on their loan. They end up owing even more because of the additional interest and late fees that accrue, and their may drop when the loan servicer reports the late payments to the credit bureaus.
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