‘Tis the Season for Student Loan Scams. Here’s How to Protect Yourself

‘Tis the season to watch out for scams if you’re paying off student loans.

This winter, scammers will be prowling for potential victims as recent college graduates start paying off their student loans, federal authorities say.

Those borrowers have enjoyed a six-month grace period following their spring graduations, but that’s now coming to an end. Time’s up. Time to join the rest of us in the not-so-fun world of “Student Loan Land.”

It’s no secret that a rising number of college grads are struggling to repay their student loans. In 2016 alone, more than 1 million Americans defaulted on them.

This ugly trend has the feds sounding the alarm about scammers falsely offering borrowers help with student-loan forgiveness. These debt relief scams are big business, raking in tens of millions of dollars.

It doesn’t matter whether you’re a recent graduate or you’ve been out of school for years. If you have outstanding student loans, don’t be surprised if you hear from one of these fraudsters.

And these shady companies won’t be calling themselves “Student Loan Ripoffs R Us” or “Student Loan Scammers, Inc.”

They’ll have a perfectly boring, innocent-sounding name like “Student Aid Center” or “Student Debt Doctor” or “Strategic Student Solutions.” (All those places got busted by the feds.) They’ll probably send you official-looking documents outlining how they’re supposedly going to “help” you.

The old saying about scams applies here: If it sounds too good to be true, it probably is.

Student Loan Scams: Don’t Believe the Hype

The Federal Trade Commission offers tips to avoid getting ripped off by student loan scams:

• Don’t trust anyone offering fast loan forgiveness. Some common scams try to lure you in with promises of “instant forgiveness.”

• Don’t pay upfront fees. It doesn’t cost any money to apply for federal repayment or forgiveness programs.

• Remember that criminals can fake government seals.

• Don’t share your Federal Student Aid website username and password with anyone.

• If you need help, you can apply for deferments and forgiveness directly, without relying on some random company that wants your business.

Here’s How to Help Yourself Out of Student Loan Debt

If you’re struggling to repay your student loans, here’s how you can help yourself.

You can go directly to the federal Education Department’s Student Aid office for information about repayment and forgiveness programs.

• A direct consolidation loan lets you combine multiple federal loans into one new loan and takes an average weighted interest rate. That way, you only make one payment a month.

• An income-driven repayment plan sets your monthly payment as a percentage of your discretionary income.

If you have federal and private student loans, you could look into refinancing them. Refinancing works like a direct consolidation loan, except you do it through a private lender instead of the federal government.

A company like Credible, an independent student loan refinancing marketplace, can replace your existing loans with a new loan, potentially with a lower interest rate and lower monthly payment.

“It’s like a Kayak or a Zillow for student loans,” says Michael Fishel, a Houston attorney who graduated from law school in 2012 with $135,000 in loans. “It’s brilliant.”

Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder. He’s quite familiar with debt.