How to avoid student loan forgiveness scams

More than 46 million Americans share $1.75 trillion in U.S. student loan debt, according to the Federal Trade Commission.

For many of us, the idea of cutting down our massive student loan debt at the snap of a finger can be an enticing idea.

“Sign up now and save BIG on repayments! We’ll help you get your student loans forgiven in as little as FIVE years! Lower your monthly payments!“

The claims are tempting, but they’re also dangerous and unrealistic. These quick-fix claims are scams, and the Federal Trade Commission has started to crack down on them to protect you and your money.

Here, we’ll outline common student loan forgiveness scams, tell you how to be on the lookout for them and highlight legitimate programs that help student loan borrowers.

The fight against scammers

In 2017 the FTC announced its new initiative to fight student loan forgiveness scams: Operation Game of Loans.

The fight continues today. Just last year, the FTC made waves when it sent $1.7 million in refunds to borrowers who were duped by a company called The Student Debt Relief Group. The fraudulent company claimed they were affiliated with the Department of Education while charging illegal upfront fees, as well as monthly fees, they claimed would be credited toward consumers’ loan balance. The company pocketed the money, then simply changed its name after the complaints started piling up.

By taking these fake companies, like the Student Debt Relief Group, to court, the FTC has returned nearly $12 billion to more than 10 million borrowers who were duped by student loan forgiveness scams.

Whether you’ve been defrauded by a fake student loan debt relief company or not, it’s good to know the government has your back in fighting against the thieves.

In the meantime, how can you make sure you don’t become a victim of student loan scams?

4 ways to spot student loan forgiveness scams

Whether you have outstanding student loan debt from federal loans or private loans, here are warning signs to watch for from loan servicer companies — or outfits pretending to be.

1. You’re asked to pay upfront or monthly fees

If a debt relief company asks you to pay upfront fees, run like the wind. That’s illegal.

They need to have actually performed the service – e.g. lower your loan payments – before collecting fees.

Instead of using one of these companies, simply talk with your student loan servicer to make a more affordable student loan repayment plan. They can do that at no cost to you.

Not sure who your federal student loans servicer is? For federal student loan borrowers, here’s what to do:

— Log in to your federal student aid account dashboard at studentaid.gov with your federal student aid ID.

— Scroll down to the “My Loan Servicers” section.

— Or call the Federal Student Aid Information Center at 1-800-433-3243.

— Once you’ve identified your loan servicer, visit this page at studentaid.gov to find their contact information.

2. You’re promised immediate loan forgiveness

You’ve got a better chance of your generous Uncle Larry paying off your student loan. With debt relief companies, instant loan forgiveness is simply not something they can do.

Some government programs offer forgiveness, like the Public Service Student Loan Forgiveness Program, but they usually still require years of qualifying payments and steady employment for you to even be considered.

You could qualify for government forgiveness because of a disability, the closure of your school, and other circumstances. But, again, this is something your servicer can help you figure out for free.

You can also fill out a student loan forgiveness form at studentaid.gov to see if you qualify.

Pro tip: Digging out of student loan debt? Here are tips for paying off your student loans fast.

3. You’re asked to provide personal information

A legitimate company isn’t going to ask you for something like your Social Security number or federal student identification. Why? They already have it if they’re doing business with you or service your loan.

If anyone asks you for this information, that’s a massive red flag. If you’ve already been duped, get in touch with your loan servicer and make sure you restart making payments directly to them. You can also file a complaint with the FTC online here or call 1-877-FTC-HELP (382-4357) for help.

4. You feel pressured to sign up for their service

Student loan scammers are notorious for pretending like they have a relationship with the Department of Education and can provide you with debt relief. The reality is that the DOE only works with a limited number of servicers.

Sketchy salespeople will use that “relationship” to pressure you into signing up for something you could do free elsewhere. They earn a commission for everyone they get to sign up, and may make you feel like they have some kind of special offer to help with student loan relief — but it’s only for a limited amount of time.

Don’t fall for the used car salesman schtick. Real debt relief programs are always available. Spend a little time researching online, check out user reviews and make informed decisions from there.

Legit student loan forgiveness programs

Despite all the scummy scamming that goes on with fake student loan relief companies, you do have some legitimate options out there. Here’s a brief rundown:

Public Student Loan Forgiveness (PSLF)

The PSLF program offers relief to borrowers working in the public sector who’ve made 10 years of qualifying payments, among other qualifiers. The program has been plagued by poor communication and other issues in the past. But after changes were made in 2021, the early returns seems to be that the PSLF program is helping more borrowers in debt.

Teacher Loan Forgiveness

Teachers who have worked for five years in a low-income elementary or secondary school can qualify for up to $17,500 in forgiveness for direct loans or FFEL loans. Learn more and apply at studentaid.gov.

Federal Perkins Loan Cancellation

Another option for teachers is the Perkins Loan cancellation. Again, you’ll need to be teaching in a school that serves students from low-income families. But you can also qualify if you’re a special education teacher, or if you teach in a field that has a shortage of qualified teachers in your state.

Total and Permanent Disability Discharge

With a Total and Permanent Disability Discharge (TPD), you can also have your loans discharged, which is essentially the same thing as having them forgiven. You’ll need to apply and give documentation that shows you meet the TPD discharge requirements.

Closed School Discharge

If your school closes while you’re attending or not long after you withdraw, you may be eligible to have your loans forgiven. As always, there’s a long list of criteria to qualify.

For a full list of student loan forgiveness and discharge programs available, visit studentaid.gov.

Robert Bruce is a senior writer at The Penny Hoarder.

This was originally published on The Penny Hoarder, a personal finance website that empowers millions of readers nationwide to make smart decisions with their money through actionable and inspirational advice, and resources about how to make, save and manage money.