7 sneaky signs that you’re about to fall for a student loan scam


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Student loan scams are, unfortunately, not uncommon. They run the gamut — from offering student loan forgiveness scams to straight-up stealing your hard-earned dollars. Since President Biden announced his plan for student loan forgiveness in August 2022, there has been an increase in student loan scams promising loan forgiveness or relying on borrower confusion around the new loan forgiveness program.

There are plenty of authentic refinancing and consolidation options, such as income-driven repayment plans, that might help you in the long run. Continue reading for more information on common student loan scams and seven red flags that can help you suss out if a company is legitimate or not.

Common Student Loan Scams

Those under stress from student loans can feel compelled to go to extreme measures to get rid of their debt, which can make them more susceptible to predatory tactics.

Promising Loan Forgiveness

One typical scam is a student loan assistance company that advertises loan forgiveness or lower payments in exchange for an upfront fee, followed by a few more payments.

Unsuspecting people pay and then six months later, the firm will shut down. This one isn’t as insidious as some other common scams, but you could still be out some money. And if you’re part of the college debt crisis and thousands of dollars in debt, that isn’t where you want to be.

Charging a Fee for Federal Student Loan Consolidation

Another common tactic is to offer federal student loan consolidation for a fee. Federal student loan consolidation is always available for free from the Department of Education. Or you could refinance your federal student loans with a reputable lender.

But it is important to remember that if you refinance your student loans with a private lender, you will lose access to federal benefits such as student loan forgiveness, income-driven repayment plans, and deferment.

If you’re going to refinance your student loans, however, it’s a smart idea to do your due diligence before signing on with a lender (of course, keeping in mind that refinancing to private loans, even with reputable lenders, can strip you federal benefits like income-driven repayment plans).

7 Red Flags for Student Loan Scams

Here are a few tips to help you spot potential student loan scams.

1. Requests For Sensitive Information Over the Phone

A legitimate private lender will need your Social Security number and other info to process your refinance application, but they are unlikely to cold call you. If you’re working with an online lender, do a little homework by researching the company and reading consumer reviews.

And if you’re really unsure, you can contact your state attorney general’s office to see if complaints have been lodged against the company. The rule of thumb here? Never share any personal information until you are 100% certain you are dealing with a legitimate lender.

2. The Company Requires Direct Payment Immediately

A major indication that you’re dealing with a student loan scam is the requirement of an upfront fee. Once they get the fee, many scam companies simply take your money and disappear, leaving your loans in forbearance (or worse, default), and you none the wiser.

Debt counseling firms are not allowed to charge you any fees until after they renegotiate, settle, or reduce at least one debt for you. Yes, a reputable lender will charge interest on your loan, but they will not ask you for cash upfront.

3. A Promise of Immediate Loan Forgiveness

Student loans are notoriously difficult to shake, even if you file for bankruptcy. There are a few situations that can qualify you for federal student loan forgiveness — for example, if under the Public Service Loan Forgiveness Program (PSLF), you’ve worked for an eligible employer, are on an income-driven repayment plan, and have made 10 years of qualifying payments.

So immediate loan forgiveness is likely a ruse. While it would be nice for all your student loans to be forgiven in an instant, this is unfortunately a pie-in-the-sky dream.

If you do qualify for one of the federal loan forgiveness options, there’s no need to have a third party negotiate for you. Simply call your loan servicer for instructions on the process — free of charge. Just keep in mind that only 1% of those who have applied for PSLF have been approved.

4. You Are Encouraged to Pay Off Your Student Loans to a Third Party Directly

Why would you want someone else making payments on your behalf? It begs the question: What are they hiding?

5. The Company Claims to Be Working with the U.S. Department of Education

Some private lenders misrepresent themselves by using names, seals, and logos that give the impression they’re affiliated with the federal government’s student loan programs (hello, Obama Forgiveness Plan). However, the Department of Education does not solicit people to borrow money.

The Department of Education doesn’t work with private loan consolidation companies, but it does work with private loan servicer companies. A servicer collects payments and handles other services on the loan you already have, but it doesn’t offer private loan consolidation. The government offers its own Direct Consolidation Loan program (by application) for free, so if anyone tries to sell you this option, they are pulling one over you.

6. Someone Is Pressuring You to Sign Up under Time Constraints

No legitimate loan program is only available for a short period of time. If they are overly insistent and don’t go for an offer to call them back directly, this could be a red flag.

7. The Company Is Charging a Consolidation Fee

This is where things can get a little murky. As noted above, there are legitimate private companies that can help you consolidate and refinance student loans for a fee. As long as they don’t charge you any fees until refinancing has occurred, they’re most likely operating legitimately.

But be cautious. Again, if you want to apply to consolidate federal student loans through the Direct Consolidation program it’s a free process — so you don’t need a company to do it for you.

If you want to consolidate and refinance your private student loans on the other hand, know that the private company is probably refinancing your current loans into one new private loan. In that case, be sure to check the interest rate, any fees, and read the fine print to see if the new deal is actually better than your old one.

What to Do if You Suspect a Student Loan Scam?

If you suspect a student loan scam, do not engage. If it is a digital scam, do not click any links and report them as spam in your inbox. Do not offer any personal information via a phone call.

You can report the scam to the Consumer Financial Protection Bureau (CFPB) and to the Federal Trade Commission (FTC).

What Recourse Do You Have if You Are Victim of a Scam

If you have already fallen victim to a student loan scam, there are some important steps to take. First, contact your local police agency to report the scam. You’ll also want to report the scam to your local Attorney General’s office.

You can also report the scam, as mentioned, to both the CFPB and FTC.

What Is Student Loan Fraud?

Student loan fraud occurs when a company or individual wrongfully or deceptively over-promises or charges a fee for unachievable services. This could occur if a company offers a fee for the promise of instant loan forgiveness.

How Student Loan Fraud Works

If a company offers a borrower a path to loan forgiveness and requires a fee up-front, this could be considered student loan fraud. Scammers may ask for borrowers’ personal information, like their Social Security number or access to their federal student aid account.

Scammers are resourceful and have been known to contact borrowers via phone, letters in the mail, email, or text messages. They may even impersonate reputable lenders — look for subtle changes in the logo on emails or websites. 

Understand how your loan services contact their borrowers — most lenders will cold call customers and ask for personal information. To protect yourself from scammers, avoid giving any personal information via phone and be sure you are interacting with a reputable agency.

Is Consolidating Your Student Loans the Right Decision for You?

Spotting a student loan scam isn’t always easy, especially when companies go out of their way to convince you they’re legit. If your gut tells you a deal is too good to be true, then it probably is.

When choosing between a Direct Consolidation Loan (for federal student loans) and student loan refinancing (for federal and/or private loans), it’s worth taking some time to learn about all your options, as the terms and potential outcomes (savings vs. interest spend) can be very different. Check out our quick guide to student loan consolidation vs. refinancing for more details.

Refinancing student loans can be a great way to make payments more manageable, depending on what kind of student debt you have. However, not all refinance options are created equal. It’s important to do your homework before deciding to consolidate and/or refinance your student loans, because your individual circumstances will dictate whether consolidation or refinancing is right for you:

Direct Consolidation Loans

Direct Consolidation Loans from the federal government can only be used to consolidate federal loans. It’s essentially a way to package multiple loans into one, giving you a new, fixed interest rate that’s a weighted average of all your federal loans (rounded to the nearest eighth of a percent) and, sometimes, a longer term. This means your monthly payment amount doesn’t necessarily go down, nor does your interest rate — it just makes things more straightforward.

Student Loan Refinancing

Refinancing means consolidating all your student loans — regardless of whether they’re federal or private. You refinance with a private lender, and typically do so if you think you might qualify for a lower interest rate. Refinancing may allow you to pay all your student loans off at a more competitive interest rate, which can save you over the life of your loan.

You can also typically change the term length on your refinanced loan — a longer term length could lower your monthly payments, while a shorter term length could help you pay off your student loans faster.

In order to know how much you could gain from refinancing, you can start by verifying how much you owe and what your interest rates are across both private and federal loans. Once you know that information, you can use this student loan refinancing calculator to see your estimated savings.

And, again, it is important to remember that if you choose to refinance your student loans with a private lender you will lose access to federal benefits such as student loan forgiveness, Direct Consolidation Loans, and income-driven repayment plans.

The Takeaway

Student loan scammers take advantage of borrowers who are trying to pay off student loan debt. These scams often appeal to borrowers looking for quick student loan relief and offer their service in exchange for a fee. To protect yourself, avoid offering personal information via requests on the phone.


How do common student loan scams work?

Common student loan scams often promise student loan relief or a quick path to loan forgiveness in exchange for an upfront fee.

Is there a way to stop student loan scam calls?

It may not be possible to stop student loan scam calls completely. If you receive unwanted phone calls, block the phone number. You can also add your phone number to the national Do Not Call list. This list prevents telemarketers from contacting you via phone, but may not prevent scammers from reaching out.

If you receive unwanted calls after signing up for the Do Not Call list, you can report them to the FTC.

What is student loan forgiveness fraud?

Student loan forgiveness fraud can occur when a company offers to assist borrowers with repayment or offers student loan forgiveness or relief in exchange for a fee. This is illegal. Most federal programs do not require a fee to access.

Learn More:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

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SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

CLICK HERE  for more information.

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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9 smart ways to pay off student loans

9 smart ways to pay off student loans

No one ever wants to talk about the unglamorous work that goes on behind the scenes, but it’s the unspoken progress that makes or breaks every successful business owner, athlete, or creative person. It is helpful to have this mindset and to think about student loan repayment like any other big feat worth accomplishing.

It begins in knowing that paying down student loans in a way that is financially smart and effective takes time and effort, most of which lies in the preparation — the proper planning, budgeting and education will make tackling your student loans during the next decade or more so much easier.

While there is no one single smartest way to pay off student loans, there are steps that you can take that will put you in the best position to pay off your student loans on a timeline and with terms that work best for you. In addition to understanding your student loans, your goal should be to build an overall financial plan that includes your loans.

Related: Why your student loan balance never seems to decrease

9 ways to pay off student loans

If you want to understand how to repay student loans in the smartest and most financially responsible way possible, here are nine steps to implement in your loan repayment plan.

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Keeping track of all of your student loans and other sources of debt can be tricky, especially if you are a recent graduate. Your first step should be to organize them on a list. On your list should include the loan service provider (the bank, federal government, or private lender), amount of the loan, monthly payment, interest rate and when the loan will be paid off in full.

If you aren’t sure what your monthly payments on your student loans will be, you can use our student loan calculator. This calculator estimates how much you could be paying each month on your student loans.

If you have credit card debt or other personal loans, include these on your list. With all of your sources of debt, mark on a calendar the date that the monthly payments are due.

While you always need to make the monthly minimum payments on all debts (unless your student loans are within their grace period or are in forbearance), listing them out allows you to identify which debts to pay off first. If you have high interest credit cards adding up each month, a credit card consolidation loan may be a great option to look at.

Once your credit cards are paid off, you’ll want to think about whether your goal is to pay your loans off quickly, or to simply make the monthly payments until the loans are done. The former is a good way to save on interest over time.

Some folks do prefer to pay only the minimum monthly amount on their student loans so that they can save and invest while they pay down their student loans.

If the interest rates on your student loans are low, this may be a good reason to start investing with your extra funds, in order to take advantage of compound returns. If the interest on your loans is higher than you could reasonably expect to make investing, it might make more sense to pay off your loans first. Which option is right for you is a completely personal decision.


No matter who you are, learning how to budget your money should be on the top of your financial to-do list. It takes time and effort to develop a budgeting system that works for you, but it is doable, and totally worth it. To get started, track your monthly cash inflows and outflows for two months.

Total up how much money you spent in each category, including debt payments like student loans. Once you have a general idea of what you’re spending in each category, you can begin to build a budget framework. For example, if you spend $260 on groceries one month and $300 the next, you can now set yourself a realistic grocery budget. Leave room for annual, bi-annual and quarterly expenses, as well as incidentals.

With a budget that is built to include student loan payments, you’ll be more equipped to make all of your payments on-time and know how much is available to spend on other needs and wants. Also, understanding exactly how you’re spending allows you to identify the areas where you’re overspending.

For example, a close look at your budget could reveal that you’re spending more than you realized on dining out, subscriptions, clothing, or even rent — and gives you the power to make a change. And by saving money in other categories, you’ll free up money to apply to your financial goals.


Hopefully, your student loans are already set up to be automatically deducted from your bank account. (This is a good strategy for all your monthly bills.) If they aren’t, contact your student loan service provider to set it up. This way, you’ll never miss a payment because you forgot or are somewhere where you can’t access the internet.

Remember, every time you miss or are late on a payment, it negatively impacts your credit score. Bad credit could preclude you from opportunities in the future, such as being able to refinance your loan to a lower interest rate. Take every extra precaution to make sure your loans get paid on time.

As an added bonus, some service providers offer a discount, usually.25%, if you arrange to pay by automatic payments. When you sign up, be sure to ask if such a discount is available.

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Most student loans allow you to pay more than the minimum monthly payment, and doing so can be a great strategy if your goal is to pay back your loan faster than the stated term. In addition to a faster payoff, you can save on interest over the life of the loan. Even small amounts make a difference. One drawback is that some providers have prepayment penalties. When you contact you student loan service provider, be sure to ask if they charge such fees.

To do this, call your loan service provider to adjust your automated monthly payment to a higher amount, and clarify that you want that money dedicated to the principal of the loan. Make sure, after the next month’s payment, that the money was indeed put towards the loan’s principal. 

Looking for more advice on paying down your student loans? SoFi’s student loan help center offers tips, guides and resources on all things student loans.

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Increasing your monthly payment isn’t the only way to put a dent in your loans; at any point, you are allowed to make a lump sum payment towards the principal of your loan. This is a great way to speed up the student loan repayment process without having to commit to paying more each and every month.

You may have more opportunities to do this than you think: Utilize your tax refund, holiday money, birthday money, work bonuses or inheritance money. Additionally, putting income from a side hustle or other passive income towards student loans could be a financially rewarding move over the long-term.


Most federal student loans come with a standard, ten-year repayment plan. With federal loans, there are other options for repayment plans with lower monthly payments, calculated using your income. These plans lower your monthly payments by extending the length of your loan, usually from ten years to twenty or more years.

When you choose one of these options, it is important to know that even though your monthly payments are lower, you can end up paying more in interest over time. Therefore, it’s not a great choice if you want to pay off your loans quickly or pay as little in interest as possible, but it is available to those who are having trouble making their monthly payments.

If you are planning to utilize the Public Student Loan Forgiveness program for your federal loans, you will need to select one of the income-dependent repayment programs.


When you refinance a loan or multiple loans, a lender pays off your current loan(s) and provides you with a new loan, ideally at a lower rate. A lower interest rate could mean savings over the life of your loan.

Though refinancing might not be the right option for everyone, it’s a strategy that every student loan holder should, in the very least, research and consider. Also, understand that while refinancing can consolidate multiple loans, federal loan consolidation is a different process. With federal loan consolidation, the government bundles your loans together into one, using a weighted average of the interest rates.

If you are able to refinance to a lower rate, you will want to ask yourself whether the purpose is to lower your monthly payment but keep the same term, freeing up some money in your monthly budget, or to keep your monthly payment the same (or higher) and to shorten your term so that you can pay off your student debt faster.

Exploring refinancing with a private lender usually doesn’t take a lot of time and it doesn’t cost you anything. 

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With all raises, you can use the extra income towards your financial goals. This could mean increasing the monthly amount you pay towards your loans, making the occasional lump sum payment towards the loan with the extra windfall, and/or saving and investing money for your other long-term financial goals.

How much money you earn is an important factor contributing to your financial stability and ability to pay down your student debt. While budgeting is important, so is knowing your worth and asking for more when you deserve it. If you haven’t already, start keeping track of your successes now so that at your next compensation conversation, you’re loaded with concrete data on why you deserve a bump.

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Although not yet as widespread as retirement or healthcare benefits, more employers are offering student loan repayment help as a benefit to attract and retain employees.

Depending on your personal situation, student loan repayment help could be as important than a raise or other benefits. Whenever you’re comparing job offers, it’s critical to understand and compare benefits packages, because although they’re not flashy like a big salary or company equity, benefits can be just as valuable.

If you’re looking for a new job, include student loan repayment help in your search. While it shouldn’t be your only consideration, it’s great to have an idea of what you’re looking for in an employer.

Learn more:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.


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