I recently received two letters promising “full student loan forgiveness,” lower interest rates, and $0 a month in student loan payments. this raised the question of whether mail-in student loan scams were now to be worried about.
The companies behind the letters did a good job of appearing legitimate. they knew my total federal balance and they had my name and address. At first glance, it looked like legitimate student loan paperwork. however, both cards were also full of red flags.
sherpa tip: Sometimes it’s hard to separate a scam from legitimate information. For example, the recent big PSLF expansion that requires some borrowers to consolidate may seem like a scam because it’s confusing and sounds too good to be true. If you find verification at studentaid.gov or through your federal loan servicer, you can be sure it’s not a scam.
the red flags: the signs of the letter can be a scam
Company name missing: One of the letters did not include the company name at all. the fine print at the bottom used the term “the company” without ever saying the name of the company. if someone wants your business, they must attach your name. if you can’t even look up the company name, it’s because they don’t want you to.
instructions for creating your federal student aid ID: One of the letters included instructions on how to create my fsa ID. the only reason they would want me to create this ID is if they are going to ask me for it. You should never share this information with anyone. according to the education department:
“Your username and password are used to electronically sign legally binding documents. they have the same legal status as a written signature. do not give your password to anyone or allow anyone to create a username and password for you. If a company has access to your account username and password information (fsa id), they can make changes to your account without your permission.”
new laws: This is another standard tool for scammers. they announce a new law just enacted that only they know about. however, a new student loan law is unlikely. if there was, you would know by watching the news, reading a newspaper, or visiting sites like this. If you can’t verify any new student loan laws from a reputable source, the chances are very high that you are facing a scam.
Document preparation and application assistance: The fine print on both letters I received made it clear that all they were really doing was helping to submit applications or process paperwork. If I called them, I’m sure they would compare their efforts to having an accountant fill out a tax return. this is a scam.
These document preparation companies charge hundreds of dollars hoping you won’t realize they’re just filling out a 20-minute form. they will almost certainly not offer useful information for any particular financial circumstance.
Important Deadline: If a letter mentions an important due date for your student loans, be careful. Your loan servicer will notify you directly of any important deadlines for your student loans. If the first thing you hear about this “deadline” is an advertisement or a letter from an unknown company, there probably isn’t an actual deadline.
protect yourself
If you receive a letter and question its legitimacy: A somewhat effective method is to google the name of the company. if they don’t have a name on the letter, you know it’s not legit. however, this method will not eliminate 100% of the bad apples because some of these companies are good at posting fake positive reviews and burying the real complaints. The Consumer Financial Protection Bureau has some additional tips for evaluating these companies.
If you think your money has been taken or is about to be taken: If you have already gone down the rabbit hole and want your money back, it will be very complicated.
If you’ve already paid them, demand your money back. tell them you will file a complaint with your state’s consumer financial protection office and attorney general if it is not returned right away. Over the years we have found that law enforcement is good at going after these companies, but they are often slow to respond as they need time to build a case. these scammers go to great lengths to stay under the radar of law enforcement. the threat to report their scam is the threat they are most likely to take seriously.
If you sent a check that hasn’t cleared, you can stop the payment. if they accepted the credit card payment, it could report the charge as a fraudulent charge to your credit card company.
Regardless of what happens to the scammer, keep a close eye on your credit report. they likely have enough information to commit identity fraud.
get revenge on scammers
There is definitely a temptation to take action to put these shady people and companies in their place.
Calling them out to waste their time may seem satisfying, but in the end, you’re just wasting their time and putting a bigger target on your back.
The step that is likely to make a difference would be filing a complaint with the government. In most states, the attorney general is tasked with protecting consumers from fraud. If he files a complaint with his state attorney general, he can alert law enforcement to the fraudulent activity.
One person taking action usually won’t make a difference, but if enough people are willing to step up, it could prevent many others from becoming victims.
In a nutshell: don’t take anything at face value
Student loans are scary and affect many people. For years, scammers have taken advantage of the student loan problem in the United States.
Usually a good rule of thumb with student loans is to double check everything you’re told, regardless of the source. You may have misunderstood something, a loan servicer may have told you something in error, or someone is trying to take advantage of you.
In a nutshell, if you think a situation is incomplete, even if you’re not sure why, you should trust your judgment.
For additional information on student loan scams, read here.