5 tips to avoid student loan forgiveness scams

The government recently announced new student loan forgiveness initiatives. These plans could offer some relief to people with federal student loans. But scammers may use this opportunity to target unsuspecting borrowers. If you're managing student debt, you may wonder how you can protect yourself from fraudsters and find actual opportunities for relief.

Read on to learn some tips that could help you spot and avoid student loan forgiveness scams. 

Key takeaways

• The Federal Trade Commission (FTC) is sending more than 20,000 checks totaling over $2 million to borrowers who lost money to the Student Debt Doctor scam.
• Working with federal agencies—like the U.S. Department of Education (DOE)—may be a safe way to explore your repayment or forgiveness options.
• According to the DOE, scammers may use messages with a false sense of urgency, like “Buy now or miss this opportunity,” to lure borrowers into their schemes. 
• Legitimate student loan services won’t ask borrowers for their Federal Student Aid (FSA) sign-in information. 

According to the FTC, upcoming student loan forgiveness programs could trigger an increase in student loan scams. You can learn ways you can reduce your exposure to frauds and scams. But the FTC warns borrowers to be wary of programs that: 

• Charge upfront costs
• Promise early access
• Guarantee eligibility

Some legitimate debt settlement firms might ask you to pay for their services. However, it’s illegal for a company to require upfront payment for debt-relief services. 

If a company requests payment for student loan services before they attempt to lower your payments or consolidate your debt, it could be a scam. If you suspect a scammer has contacted you about fraudulent student loan forgiveness services, you can report it to the FTC. 

Keep in mind that you don’t need a debt-relief company to enroll in forgiveness programs, consolidate student loan debt or find repayment options. You can research federal student loan repayment or forgiveness options for free by contacting your loan servicer or using the DOE’s loan simulator. 

There are some free services that could help borrowers manage federal student loan debt and avoid defaulting on their loans. These services may help borrowers reduce monthly payments, change repayment plans, consolidate student loans or connect them with loan forgiveness programs.

Examples of student loan forgiveness programs

Student loan scams often promise instant relief if you act immediately. However, this type of message is in stark contrast to the way legitimate student loan programs work. That’s because legitimate programs often have enrollment conditions—like career-specific eligibility or repayment history requirements. Here are some common student loan forgiveness programs that may offer relief to certain borrowers:

• Public Service Loan Forgiveness (PSLF): College graduates who work for qualified employers in qualified public service positions could have the remaining balance of their Direct Loans forgiven. PSLF requires eligible borrowers to perform 10 years of full-time public service work and make 120 on-time student loan payments under an income-driven repayment plan. 
• Income-driven repayment plans (IDR): There are currently four different IDR plans that may help some borrowers repay their student loans. Most federal student loans are eligible for at least one of these programs. You can read more about IDR requirements.

The Biden administration's student loan debt relief plan

President Biden recently announced a plan to help federal student loan borrowers manage their debt. Some borrowers may be eligible for up to $20,000 in federal student loan forgiveness. The administration is still developing the application process for this forgiveness plan. You can subscribe to the DOE’s email list for program enrollment updates. 

What about private student loans? 

There are several different types of student loans, and the type of loans you have can affect your eligibility for federal student loan forgiveness. Private student loans are typically controlled by lenders, such as banks and credit unions. That’s why the Department of Education doesn’t have the ability to grant forgiveness for private loans. 

Borrowers with private student loans may consider refinancing high-interest loans or requesting forbearance. Private borrowers could also see if their employer offers tuition reimbursement. Some states even extend private loan forgiveness opportunities to their residents. 

Scammers may ask for your Federal Student Aid information—like your username or password. But the DOE and legitimate loan servicers won’t ask for this information. It could also be a red flag if a debt-relief company asks you to sign a power of attorney agreement (POA). 

Anyone with access to a borrower’s FSA ID or POA could perform actions in the borrower’s name, such as changing account settings, viewing their financial aid information or signing legally binding agreements. If that happens, the borrower could be responsible for late fees, accrued interest and outstanding payments. If you believe someone may have accessed your account information, you can contact your loan servicer and update your information. 

Are you wondering if the calls you’re receiving about student loan forgiveness are fake? Unsolicited calls that promise student loan assistance could be a potential red flag. Borrowers should also be wary of texts, phishing emails or letters that warn these relief programs will end soon. 

Legitimate offers for student loan help will come from the DOE, which sometimes contacts borrowers directly about certain loan forgiveness programs. The department also has updates about student loan forgiveness on its website. 

Knowing the signs of a potential scam could help you avoid falling into their trap. Watch out for calls, texts, emails or letters that contain the following tactics:

• Time-sensitive messages: You’re told program enrollment is on a first come, first serve basis or an offer will expire if you don’t act now. 
• Instant results: Some scammers may claim their services offer instant student loan forgiveness.
• Spelling and grammar errors: Messages with odd capitalizations, spelling errors or grammatical mistakes could all be signs of a scam. 

Borrowers are encouraged to contact the DOE if they receive these types of messages. The department’s student aid site also has information about potential scams and a list of legitimate DOE partners and programs. 

Student loan scams could impact a borrower’s financial health and their credit scores. Thankfully, there are things you can do to protect yourself and report these situations.

If you suspect you’ve been contacted by scammers or enrolled in a fraudulent program, the DOE recommends you take the following steps:

• If scammers access your FSA information, change your password immediately. You can contact the Federal Student Aid Information Center for assistance. 
• Contact your bank or credit card company to report fraud and stop payments to the student loan debt relief company. 
• Reach out to your student loan servicer. They might be able to help you revoke power of attorney or third-party authorization agreements associated with your account. 
• You can report fraud to the FTC and you may also file a complaint with the Consumer Financial Protection Bureau. 
• You can also file complaints at StudentAid.gov or with your state’s attorney general.

Student loan debt can be a major financial hurdle for many borrowers. Unfortunately, scammers may use promises of affordable repayment plans or instant debt forgiveness to defraud innocent people. 

Fortunately, there are federal student loan programs that can offer relief and assistance to borrowers. And certain strategies could help you pay off student loans faster.