Student Loan Payoff Scam Alert: 5  Red Flags to Look Out for

Trish Sammer Updated on June 14, 2018

If you have student loans, you've probably seen claims by companies that claim they can reduce your loan payments, pay your loans down quickly, or eliminate your loans altogether.

Unfortunately, some things are too good to be true. But considering that some legitimate companies do exist to help you pay down your debt, how can you tell the difference? 

scam-129749-edited

Claims like “Act immediately to qualify for student loan forgiveness before the program is discontinued" should be reg flags that these companies are running scams. The Federal Trade Commission, in fact, has prosecuted companies against unlawful student loan debt relief practices. 

Student loan debt relief companies are private companies that claim to help you manage your student loans for a fee. Usually, they offer services, like lowering your monthly payments, that you can do yourself. These companies are not affiliated with the Department of Education, though they sometimes falsely claim to be.

Whether these companies are sending you mail, calling you or advertising on TV, here's what you should watch for to make sure you're not scammed:

1. They ask for up-front or monthly fees

It's illegal for companies to charge an up-front fee for helping you before they even start working with you.

In addition, it's important to know that assistance on loan management is available directly through your loan servicer for free, so be wary of any company charging an upfront or monthly "maintenance" fees.

2. They promise immediate and total loan forgiveness

If it sounds too good to be true, it probably is.

A company that offers immediate and total loan forgiveness or cancellation is promising something it can't keep.

While forgiveness programs are available directly through the federal government, it often takes years of making on-time payments or requires employment in certain fields. Debt relief programs can't bypass these requirements.

3. They practice aggressive tactics

Borrowers have reported companies aggressively calling, texting or emailing them. These companies also tend use urgent language, such as like, "Your loan is flagged" or "Act immediately." They also run ads on TV and online.

Beware of claims than an offer is limited, or that you have to act urgently because of new laws or programs that have a deadline. Legitimate companies don't use these aggressive tactics. To be sure you're not getting into a scam, always verify that companies are actually tied to the Department of Education.

Imagine Life Without a Student Loan Payment... Start Saving Now!

4. They ask for personal account information

Companies that are pulling a scam will sometimes ask for your Federal Student Aid (FSA) ID and/or password. 

Anyone who has your ID can sign legally binding documents, so it's important to not give this information to anyone, even if they claim they can help.

5. Their communications are full of grammatical and spelling errors

Emails, ads, and other communications you see that are riddled with grammatical and spelling errors should be a clue that something's not quite right. If a company is truly a professional entity, their communications should be formal, accurate, and well-written.

What to do if you think you've been scammed 

If you've been been scammed by one of these companies and have given them information or payment, here's what you can do, according to the U.S. Department of Education

  1. Change your FSA ID and password. Don't share this new login information.
  2. Contact your loan servicer and tell them what happened. Ask about recent activity to make sure no one took unwanted actions, then ask them to revoke any third-party authorization agreement that the company may have placed. 
  3. Contact your bank and credit card company and ask them to stop payment to that company.
  4. File a complaint to the Federal Trade Commission, which is responsible for handling fraud, identity theft or an unfair business practices. Visit ftc.gov/complaint.
  5. File a report of suspicious activity to the Federal Student Aid Feedback System.

See also: How to Avoid Student Loan Relief Scams

Looking To Conquer Your Student Loan Debt?

Yes! Send Me The Savings Blueprint

Published in: Forgiveness

About the Author
Trish Sammer

Trish Sammer is Comet's managing editor. Her work has appeared in Woman’s Day, Redbook, Huffington Post, TechCrunch, and Forbes. She has also written for various corporate clients, including the tech giant SAP, The Franklin Institute, and PSE&G. When Trish isn’t busy acting as a writing ninja for other people, you can find her … well, writing about other stuff, like divorce and blended family life. She lives outside of Philadelphia with her almost-husband, their combined brood, and the world’s laziest dog. Read more by Trish Sammer

Save Today With These Leading Lenders

#1 - Comet Recommended View More Details

Works with 275+ not-for-profit community lenders for higher approval chances

  • APR: 2.67% - 8.92%
  • Minimum credit score: 660
  • Refinance up to $300K
View More Details
Visit LendKey View Loan Disclosure

LendKey operates student loan programs for over 275 not-for-profit and community lenders across the country. By partnering with these lenders, LendKey is able to give consumers direct access to the best rates available from the most borrower friendly institutions. As the servicer of all loans obtained through its platform, you can rest easy knowing your personal information will be safe and that the best customer service team will be ready to answer your questions from application until your final payment.

LendKey Student Loan Refinance review

  • Lightning fast rate check - 2-minute rate check with no impact on your credit score
  • More lenders, more options - see the best offers from over 275 not-for-profit and community lenders for higher approval chances
  • Life of loan relationship - With LendKey, your personal information will never be sent or passed on to third parties. Their customer service team is with you from the moment you land on their website until you've completely repaid your loan.
  • Unmatched benefits- Community lenders put people over profits and offer unique benefits like cosigner release after 12 on-time payments, interest only repayment options to keep monthly payments low, the largest unemployment protection period in the market, and more.

Get a personalized quote from LendKey now.

#2 View More Details

Offers unemployment protection and career/coaching/networking

  • APR: 2.560% - 8.024%
  • Minimum credit score: 650
  • Refinance up to 100% of student debt
View More Details
Visit SoFi View Loan Disclosure

SoFi, which stands for “Social Finance,” was created by a group of Stanford business students who found themselves with a mountain of debt after graduation. They set out to change the student loan industry and help borrowers like themselves to get lower interest rates. SoFi has some of the lowest interest rates and, unlike the other lenders we reviewed, it has no maximum amount you can finance. However, Nevada residents can’t currently refinance with SoFi. Minimum loan balances are higher in Arizona, Massachusetts and Pennsylvania due to state laws. Additional state restrictions may apply.

SoFi Student Loan Refinancing Review

  • Low interest rates - For well-qualified borrowers, SoFi offers some of the lowest rates we have found.
  • Strong customer service - It has more than 350 customer service reps available to help applicants through process.
  • Career coaching and networking - Perks include career services representatives who can help you find a job or negotiate a higher salary. SoFi also hosts networking events, happy hours and educational lectures on topics like buying a home in major cities around the country.
  • Unemployment protection - Borrowers who lose their jobs through no fault of their own may apply for Unemployment Protection. If approved, SoFi will suspend their monthly SoFi loan payments and provide job placement assistance during the forbearance period. These benefits are offered in three month increments, and are capped at 12 months, in aggregate, over the life of the loan. Note that interest will still accrue while loans are in forbearance.

Find out what interest rate SoFi can offer you here.

#3 View More Details

For every loan they fund, they contribute to the education of a child in need

  • APR: 2.48% - 6.25%
  • Minimum credit score: 660
  • Refinance up to $500K
View More Details
Visit CommonBond View Loan Disclosure

CommonBond was founded in 2011 by three MBA graduates from the University of Pennsylvania’s Wharton School who wanted to help their peers escape from high-interest student loan debt. Its original focus was on grad students, but it has since expanded to cover undergrads as well.

Of all the companies we reviewed, CommonBond has some of the best customer service. The company prides itself on being easy to reach by email, phone, or live chat. It offers networking events, expert panels, insider newsletters, and even has a program help borrowers who lose their jobs to find new ones. CommonBond also makes you feel good about choosing to refinance with them by donating money to an education nonprofit for each loan they write.

CommonBond Student Loan Refinance review

  • Unemployment protections - If you lose your job or decide to go back to school, you can delay your payments for up to 24 months.
  • Social promise - For every loan they fund, they also contribute to the education of a child in need.
  • Hybrid loan option - Offerings include a 10-year hybrid loan with fixed interest for the first five years, and variable interest for the final five.
  • Referral bonus - For every friend you refer who refinances their loans with CommonBond, you’ll earn a $200 cash bonus.
  • Qualification - Borrowers must have graduated at least 2 years prior if they want to apply without a co-signer. And borrowers in 6 states – Idaho, Louisiana, Mississippi, Nevada, South Dakota, and Vermont – cannot currently refinance through CommonBond.

Get a personalized review of your refinancing options with CommonBond today.

#4 View More Details

Earnest empowers people with the financial captial they need to live better lives.

  • APR: 2.55% - 7.89%
  • Minimum credit score: 650
  • Refinance up to $500K
View More Details
Visit Earnest View Loan Disclosure

Using technology, data, and design to build affordable products, Earnest's lending products are built for a new generation seeking to reach life's milestones. The company understands every applicant's unique financial story to offer the lowest possible rates and radically flexible loan options for living life.

  • Commitment-free 2 minute rate check
  • Client Happiness can be reached via in app messaging, email, and phone 
  • No fees for origination, prepayment, or loan disbursement
  • Flexible terms let you pick your exact monthly payment or switch between fixed and variable rates
  • Skip a payment and make it up later
  • Online dashboard is designed to make it easy to apply for and manage your loan

Click here to apply with Earnest and to see how much you can save.

#5 View More Details

Operates in all 50 states; 2nd largest student loan refinancing lender

  • APR: 3.23% - 7.02%
  • Minimum credit score: 660
  • No refinancing amount maximum
View More Details
Visit Laurel Road View Loan Disclosure

Laurel Road is a national online lender with customers in all 50 states, the District of Columbia, and Puerto Rico. Many of our non-bank competitors are not able to lend in all 50 states.Laurel Road has grown to be the second largest player in the student loan refinancing space in large part because of our reputation as the go-to low rate provider.

Laurel Road Student Loan Refinance Review

  • National reach - Online lender that is available in all 50 US states, the District of Columbia and Puerto Rico.
  • No fees & the lowest rates in the space - Laurel Road is the most transparent about the rates they provide customers, and offer the lowest rates where it counts. Our customers will save more than $20,000 over the life of their loans on average. 
  • Customer service reputation - Laurel Road's customer service representatives are no rookies. With 19 years of experience on average, Laurel Road’s Customer Service team delivers an experience that is best in the industry. They work to build meaningful, life-long relationships with our valued customers to improve their overall financial wellness.
  • The stability & security of a bank - They are a division of Darien Rowayton Bank, a stable and secure FDIC-insured bank, regulated by the FDIC and the Connecticut Department of Banking.

Get your personalized, pre-approved rates in less than 5 minutes.

#6 View More Details

Special offers for medical resident and fellow refinance products

  • APR: 3.10% - 7.84%
  • Minimum credit score: 670 w/cosigner
  • Refinance up to $350K
View More Details
Visit Splash View Loan Disclosure

Splash Financial is a leader in student loan refinancing with new rates as low as 3.25% fixed APR which can save you tens of thousands of dollars over the life of your loans. No application or origination fees and no prepayment penalties. Splash Financial is in all 50 states and is intensely focused on customer service. Splash Financial is also one of the few companies that offers a great medical resident and fellow refinance product. You can check your rate with Splash in just minutes.

  • Low interest rates – especially for graduate students
  • No application or origination fees. No prepayment penalties.
  • Co-signer release program - you can apply for a cosigner release form your loan after 12 months of on-time payments
  • Specialty product for doctors in training with low monthly payment

Click here to see more of Splash's offerings and to see how you can save money.

Save on Your Student Loans
$
$
Article Topics

Looking To Conquer Your Student Loan Debt?

Yes! Send Me The Savings Blueprint

More Articles in Forgiveness
The Best Companies To Refinance Your Student Loans Save Money Now
Additional Resources
Comments

"I reduced my student loan payment by $152 per month, by refinancing thru Comet"

Save Money Now