2 warning signs
Being asked to pay an up-front fee is the first red flag to watch out for.
Unscrupulous companies that are counting on the fact that you don't know any better will try to get you to commit to a fee of some sort — whether they call it an enrollment fee, a subscription, a consolidation fee, or a maintenance fee. This charge is often $999 or 1% of the loan balance.
But like we said earlier, your loan servicer can help manage your federal student loan debt for free. Any money that you're asked to pay upfront could have gone to your loan balance.
Another red flag is when private companies ask for information such as your Federal Student Aid (FSA) PIN. Because your FSA PIN can be used to look up your student loans and personal information, as well as to apply for new loans, you should be very careful about giving out this information.
Legitimate options for debt relief
So who can you trust?
Your loan servicer
This is the company that handles the payments and other services for your federal student loans. They can work on anything from adjusting your repayment plan to consolidating your loans so that your debt is easier to manage.
They can also help you determine if you're eligible for student loan forgiveness. Be sure to call your servicer to get the most accurate information for your particular situation.
Companies that don't charge up-front fees
Many private companies and lenders can also be good resources for student loan debt relief through refinancing or consolidation. How can you tell if they're legit? They won't ask you to pay upfront costs.
Refinancing your student loans should save you money, not cost you money. Legit companies will present offers that will allow you to lower your interest rate so reduce your monthly payment or save money over the life of your loan.
If you opt for the refinancing route, you'll need to do some research to make a good decision. Be sure to compare lenders, rates, and loan terms.
Check out our picks for the Best Banks for Student Loan Refinancing.