Student loan forgiveness is a common area for scammers and unethical companies who aim to exploit the fears of new grads. Student loan debt and major loan balances create anxiety for borrowers, and the hope of debt forgiveness could result in unwise decisions.
Student loan forgiveness scams often:

• Require up-front payment
• Impose charges for what should be free services
• Offer to get rid of private loan debt
• Divulge personal information

If you’re a college student or graduate, it’s important for you to be on the lookout for scammers’ red flags. Otherwise, you could possibly fall victim to identity theft and need help from the Federal Trade Commission or Consumer Financial Protection Bureau.

For instance, you can create an identity theft report with the FTC at IdentityTheft.gov. You can also submit a complaint with the CFPB. Both agencies offer advice and instructions to help recover from identity theft.

In addition to businesses engaged in fraudulent and illegal behavior, there are also illegitimate debt relief companies that target students with misleading emails and aggressive TV and online advertising. While many of these companies have been fined and/or shut down, there are still many examples of ongoing unethical practices that aim to victimize student loan borrowers. It’s important to stay vigilant, as there often might be no recourse in these situations to help you recover monies you’ve paid out, and you’re still left with your debt to pay, and potentially late fees.

Thankfully, there are a number of ways to detect common scams. Here are some key red flags to look for and ways to help protect yourself.

5 common signs it could be a student loan forgiveness scam

1. Aggressive sales tactics

Legitimate student loan forgiveness companies and government agencies do not use aggressive sales tactics, spammy emails, constant calls from unrecognizable phone numbers, junk mail, sales calls, threats, or demands. Nor will they seek your personal information. Federal agencies like the U.S Department of Education are in the business of regulating the unfair practices of lenders, not selling you on a quick fix program for your student debt.

The Federal Student Aid office will provide guidance, notify you of changes and opportunities, help borrowers avoid scammers, and educate borrowers about the types of aid available. They also offer legitimate student loan forgiveness programs, like Total and Permanent Disability Discharge, that can actually discharge loans in specific situations. What they don’t do is call you repeatedly, or advertise, or try to sell false promises. If anyone does this, you should suspect that you’re dealing with a scam. Just hang up.

Real debt consolidation companies, or at least the ones you can trust, also don’t usually spend time selling people on programs or telemarketing. It’s simply wise to stay away from any companies that get aggressive.

2. Promising to free you from debt

The thing about student debt, whether a private or federal loan, is that it cannot be totally forgiven unless you fall into one or more qualifying circumstances. More on that below. The majority of borrowers have to pay it off in full, but there are federal programs that can legitimately discharge a portion of your debt. Private companies, however, cannot discharge debt. The minute any private company promises to get rid of your student loans, your best bet is to walk away.

A quick Google search for student loan forgiveness will result in ads promising to “DISCHARGE YOUR LOANS TODAY!” It’s common to see the same thing across social media, from telemarketers, and in junk mail. These are almost always scams. A huge promise of no more debt can be compelling, but like most things that sound too good to be true, this probably is, as well.

3. Claiming to be affiliated with the U.S. Department of Education

While private companies often service debt or act as student loan servicers, there are no third-party debt relief companies that have a direct relationship with the U.S. Department of Education. If a company or scammer tells you they work with the Department of Education, it’s simply not true, and should be an obvious red flag that puts you on high alert. The Department of Education is independent from private companies. It doesn’t offer debt forgiveness through private companies or anything else a scammer may claim.

Illegitimate loan servicers may also place U.S. Department of Education seals on their websites — another red flag. Anyone can get the seal and stick it on their website, but that doesn’t mean it’s real.

4. Tempting you with false legal claims

There are no situations in which a law firm can save you thousands by paying your loan directly to them. This is a scam and could lead you to waste money that won’t put a dent in your loan’s principal. Usually these scams come from a debt relief company claiming that their law firm can save you money. This is false.

Scammers have many resources at their fingertips, so it’s not uncommon to see official looking emails and mailings promising lawsuit-based debt forgiveness. They use legal jargon and formal-looking letters and emails to try to trick debtors. The best rule is to never respond to any such claim.

5. Asking for up-front fees

Any company that asks for money to sign up for their services should be avoided. Students and post-grads may be more likely to fall for this, and could waste hundreds of dollars as a result. It’s understandable, as people may assume they’re getting something legitimate in return for their money.

Companies that ask for up-front fees may also charge so-called “monthly maintenance fees” or similar monthly payments for access to services that are free through a government program.

Other loan forgiveness red flags

• Promising instant loan cancellation
• Promising to settle your loan for a set amount
• Promising to make your loan repayment for you
• Advising you not to make your loan payments
• Asking for sensitive information like your Social Security number or FSA ID password

2 ways to help protect yourself from student loan scams and identity theft

Use federal resources

One of the best ways to help protect yourself is to use federal resources or trusted experts to stay informed on student loan forgiveness scams. They say knowledge is power, and that definitely applies here. If you use a keen eye when dealing with loan forgiveness schemes, you may be less likely to fall for them. Trusted federal resources can include:

• Forgiveness, Cancellation, and Discharge
• Avoiding Loan Scams
• Federal Student Aid
• U.S. Department of Education

Know the legitimate options

Focus on getting yourself in the best position to pay back your student loans, making regular payments, and utilizing federal programs you may qualify for. One of the best ways to help protect yourself from falling for a loan forgiveness scam is to actually know what your real options are. Four legitimate loan forgiveness options include:

1. Total and Permanent Disability Discharge
2. Public Service Loan Forgiveness Program
3. Income-Driven Repayment Program
4. Perkins Loan Cancellation

Armed with the right knowledge and tools, you can detect and help avoid a student loan scam before you become a victim.