Anatomy of a student loan scam

Struggling to make your student loan payments each month? Or maybe you’ve already fallen behind and are being hit with late fees from your lenders. Be careful: You’ve become a prime target of scam artists. The Consumer Financial Protection Bureau says that scammers have stolen millions of dollars from student loan borrowers, usually targeting those who have fallen behind on their payments. According to the bureau, some individual borrowers have lost thousands of dollars by falling victim to these crimes.

How do student loan scams work? 

You might receive an email, text or call from someone claiming to be working with a debt-relief agency. This message promises that the company can either negotiate a lower monthly student loan payment or eliminate your student loan debt completely. 

The scammers might request an upfront payment so that they can work on eliminating your debt. Or they might ask for your bank account information, credit card number, or Social Security number. And if you send them a payment, the scammers will either take your money and do nothing or they’ll simply do work that you could have done on your own for free. If you provide your credit card number, bank account information, or Social Security number, they’ll use this information to access your online bank accounts, make illegal purchases with your credit card, apply for new credit cards or loans in your name, or sell this information on the Dark Web. 

But that’s just one version of this debt-relief scam. Other criminals might send a similar message promising to help you lower your monthly student loan payments or eliminate a good chunk of what you owe. But instead of asking for a payment directly, they’ll include a link in their text or email. 

When you click on the link, you’ll often be taken to a new web page where the scammers request that you provide your personal information. Other times, clicking on the link will flood your laptop or smartphone with malware that allows hackers to track your keyboard strokes or spy on your online activity. By doing this, hackers can steal your passwords, snoop on your personal messages, and figure out how to log onto your online bank or credit card accounts.

As you can see, scammers prey on your worries about falling behind on your student loan payments. They hope that you are so desperate for financial relief that you’ll willingly provide your financial information or send them money to make your student loan problems disappear. 

The key to avoiding these scams, then, is to remember three rules: 

• No legitimate debt relief organization will request upfront payments for work they haven’t yet done.
• Never give your financial or personal information to anyone who contacts you by phone, email, or text.
• And never click on links in emails or texts from senders you don’t know or trust.

The signs of a student loan scam

What are the tell-tale signs of a student loan scam? The Consumer Financial Protection Bureau recommends watching for the following: 

The person calling, texting or emailing asks for upfront fees: As the Consumer Financial Protection Bureau says, the company that services your student loan will not charge you for drafting a new repayment plan. Any company that asks for a fee to reduce your monthly loan payment or forgive a portion of your debt is trying to scam you. And if that same company asks for your credit card number or bank account information? Then it’s almost certain you’re dealing with a scammer. Your best move is to immediately hang up the phone or delete any texts or email messages that you receive from these scammers. And if you want to be certain that a legitimate representative from your loan servicing company isn’t reaching out to you, call your loan servicer at the customer-service number on your paper or online billing statement.

Never trust a debt relief company that says it can immediately eliminate your student loan debt: It’s not easy to wipe away your student loan debt. You can’t even get rid of it by declaring bankruptcy. So whenever someone promises that they can eliminate some or all of it? That’s a sure sign of a scam. Maybe you have a repayment plan tied to your annual income. If so, the amount you pay each month is set by federal law. There are legitimate loan forgiveness programs offered for federal student loans. But unless you’ve already logged many years of making your monthly payments, you probably can’t qualify for them. Companies that promise that they can immediately eliminate your student loan debt once you sign a contract are running a scam.

And if you’ve taken out private student loans, don’t believe anyone who says they can eliminate or reduce that debt, either. Private lenders won’t call you asking if you need debt relief. They might respond and offer a repayment plan if you call them. But they won’t initiate contact.

Companies that ask for your Federal Student Aid ID: Your Federal Student Aid ID is a username and password combination that you use to log onto your federal student loan portal. No legitimate company will ask for this information. So if someone calls, texts or emails you asking for it, don’t respond. 

If you do give this information to a con artist, that person could use it to access your student loans online and make changes to your account without your permission.

Claim to be affiliated with the U.S. Department of Education: Scammers often pretend to be from the U.S. Department of Education. But don’t take the bait: The Department of Education will never call you about reducing your monthly student loan payment, reducing the amount you owe or consolidating your debt. The department won’t call you about your student loan at all.

If you are paying back federal student loans, your official loan servicer will be the company that handles any debt repayment changes or consolidation plans. And if you have taken out private student loans, those lenders are the ones you’d deal with to handle any changes to your payments or loan details. Student loans are a hassle, and they’re often the very first major financial obligation that young adults take on. Protect yourself by staying vigilant against scammers who want to take advantage of that vulnerability.