It’s possible to make a good life for yourself without a college degree, but it certainly helps. Back in 2015, the Social Security Administration calculated that a bachelor’s degree added hundreds of thousands to your lifetime earning potential, and a graduate degree added over a million.
Education isn’t a quick ticket to Easy Street, of course. Even for those who eventually do very well indeed, those early years after college — when you’re paying off your loans but still only making entry-level money — can be stressful. That’s why you’re likely to receive a student-loan scam call one day: scammers want to leverage your stress for their own advantage.
Why Do I Keep Getting Calls About Student Loans?
Supposedly a reporter once asked the Old West bandit Frank James (Jesse’s brother) why he robbed banks. His reply? “That’s where the money is.”
Make no mistake, there’s a lot of money tied up in student loans. In 2020, according to the Federal Reserve, student loans totaled just over $1.7 trillion: for comparison purposes, car loans checked in at about $1.2 trillion. That’s staggering, when you think about it. In car-loving America, student debt is almost 50% higher than car-loan debt.
If you’ve been receiving repeated phone calls about your student-loan debt, this is why. You’re part of a trillion-dollar sector of the economy, and that means plenty of entrepreneurially minded people want to help you manage your debt. Some of them are legitimate, but many will be criminals and scammers.
A Scam, or Not a Scam?
Before we look at the differences between legitimate assistance and outright scams, let’s deal with the elephant in the room: there is absolutely nothing any of these callers can do for you that you can’t do for yourself for free, or with assistance from the government (also free). So why would you pay someone to do things for you that you can do for yourself?
There are actually a few reasons. You might simply lack the time, expertise or physical and mental energy to tackle the project. You might be worried about making a costly mistake, and consider it worthwhile to delegate to a professional who knows the ins and outs of the student-debt system. That’s essentially the same niche tax preparers occupy, and it’s perfectly valid. You get something of value — expertise, peace of mind, convenience, perhaps even long-term savings — in exchange for the money you pay out.
Of course, in some cases you may not see any added value. Your “debt counselor” might just fill out the forms and take your money, without bringing anything to the table. That’s still technically legitimate, though not good value for you as the consumer. Others are outright scammers, pillaging your personal information and your bank accounts for their own gain and offering little or nothing in return.
Student-Loan Scam Calls
For as long as your student loan is on the books with one or another lender, you can expect to be approached frequently by debt-relief companies — some legitimate, some shady, some downright fictitious. They know you’re probably stressed over your debt, and they’ll offer to help ease that burden. The services they offer may include:
- Lowering your monthly payments
- Getting your loans out of default
- Arranging forgiveness or even cancellation of your loans
- Securing deferment or forbearance, if you’re having trouble making your payments
- Changing your repayment plan
- Consolidating your loans
Aside from phone calls, you may also receive pitches by mail, online advertisements, social media suggestions and just about any other medium that human ingenuity can envision. How can you recognize the sketchy ones? Well, there are a few consistent red-flag details, a couple of them familiar from most other phone scams:
- You need to pay up front.
- They offer quick or immediate forgiveness.
- They want your Federal Student Aid (FAS) ID.
- They ask for a power of attorney or “third party authorization.”
- They want you to act right now, because … [reason].
- They’ll offer to remove your valid, legal loans from your credit record.
- They claim to be affiliated with the Department of Education.
Avoiding Student-Loan Scammers
If you step back from the high-pressure pitch from the salesperson you’re dealing with (itself a strong warning), most of these come-ons are clearly problematic. For one thing, you should never have to pay up front. Quick or immediate loan forgiveness is always bogus (public-service loan forgiveness is legitimate, for example, but it takes 10 years), and you can’t just have legitimate debt expunged from your record. Loan consolidations may cost you more in the longer term. Giving someone power of attorney, or your Federal Student Aid (FSA) ID, means giving up any control over how your account is managed.
Your first line of defense against all of this is, ironically, education. Spend some time on the Federal Student Aid website, the FTC’s student loans/loan scams page and the Consumer Financial Protection Bureau’s loan scams page. If you have private loans, scour your loan provider’s site or reach out to their customer-service department. The more you know about how the system works, what your rights are within the system and what you can do for yourself, the better you’ll be able to judge which offers are legit and which are scams.
You can use Spokeo’s people search tools to chase down any phone number, address or email address you’ve been given, and determine whether there is in fact a real company behind it. Remember, that doesn’t necessarily mean they’re legit (the FTC brings charges against shady companies all the time), it just means the company isn’t fictitious. If the company claims to work for or with the Education Department, check them against the ED’s list of legitimate loan servicers (and view the FTC’s list of people and companies banned from offering debt-relief services, as well).
Being Proactive About Your Student Debt
If you feel like you’re suffocating under the weight of your student debt, the best way to avoid being vulnerable to scammers is to take control of the situation for yourself. Yup, the best answer is “Act now!” — just like the scammers keep telling you — but on your own terms.
Reaching out directly to the Department of Education or your actual loan servicer is your best option. They can walk you through the available alternatives and help you figure out (at no cost to you!) which forms of relief you’re eligible for and which of those might be most advantageous in your specific situation. The same holds true with private lenders, who are equally motivated to help keep you out of default (collections are costly; it’s sheer self-interest for them to keep the payments coming in some fashion).
Once you know you’ve done everything you legitimately can, you can handle all of the incoming calls and offers — bogus or otherwise — with a brisk “Not interested!” and get on with your day.
- US Social Security Administration: Education and Lifetime Earnings
- US Federal Reserve: Consumer Credit, May 2021
- Federal Student Aid: Avoiding Student Aid Scams
- US Federal Trade Commission: How Student Loans Work and How to Avoid Scams
- Consumer Financial Protection Bureau: How Do I Avoid Student Loan Scams?
- US Federal Trade Commission: Big FTC Win Against Student Debt Relief Firm
- Federal Student Aid: Who’s My Student Loan Servicer?
- US Federal Trade Commission: Companies and People Banned from Debt Relief