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Avoiding Student Loan Scams

Student loans can be a daunting experience for many, whether it’s borrowing money for college or paying it back after graduation. Unfortunately, many criminals and unscrupulous companies take advantage of this uncertainty. Last year, Americans lost over $5 billion to student loan fraud, according to Forbes. With hundreds of millions of robocalls, emails, and other solicitations every month, those numbers are likely to climb. You can protect yourself with these smart tips.

Don’t EVER Pay for Help with Financial Aid
The information you need to apply for financial aid is free and available online. There’s no need to pay well over $1,000 for help from a commercial financial aid service. Financial-aid-for-a-fee services often guarantee results or urge you to act now before losing out on an opportunity.

The truth is that your financial aid options are not adjustable by how you apply or who fills out the form. The U.S Department of Education monitors and runs the free, online federal student aid form. The amount you receive is based on specific financial criteria and eligibility.

Instead of paying someone to help you, simply start with the free FAFSA form here. The form walks you through the process, shows you all of your funding options, and gives you legitimate links to grant and loan opportunities. They even have information for parents. Need more help? Check with the financial aid office at the school or college you plan to attend.

Be Careful When Consolidating Student Loans
A mere one out of every thousand student loan balances are ever forgiven through bankruptcy, according to Duke Law Journal. The only way out of student loan debt is through repayment. But contrary to the doomsday headlines out there, you do have affordable options. Here’s how to understand those possibilities and avoid becoming a student loan consolidation scam victim.

  1. Know who your loan servicer is and only deal with them, if possible. If you have federal loans, the lender is simply the U.S. government. If not, the name of the servicer can be found on your Federal Student Aid (FSA) account dashboard.
  2. Check out your repayment options. The FSA loan simulator shows you all your repayment options and monthly payments.
  3. Never pay for help with your student loans. There are many companies out there that pretend to be affiliated with the U.S. Department of Education and promise to help with your student loan repayment options. In reality, there are only six affiliated companies. You can find those companies and their FREE services here.
  4. Keep your FSA ID and login private. Criminals have been known to ask for this information with the promise of helping borrowers reduce or eliminate payments. All a victim receives is a stolen identity and plenty of paperwork as they attempt to reestablish their payments.

Whether you’re borrowing money for school or need help paying it back, it’s easy to spot a student loan scam. Just look for these telltale signs:

  • Asks for up-front or monthly fees. Applying for student loans and getting help with repayment options is free.
  • Offers total and immediate loan forgiveness.
  • Requests for your FSA ID and login information.
  • Requests that you sign a power of attorney.
  • Conveys urgency to act today to avoid limited time, special offers.

Know Your Repayment Options. These include income-driven plans, fixed-payment plans, direct consolidation loans, deferment and forbearance options, help with delinquency, and even loan forgiveness options for some professions.

Report Student Loan Scams
If you experience student loan or repayment scams, contact the Federal Trade Commission, as well as your original loan servicer. They can help revoke any authorizations you may have initiated. Additionally, stop all payments to anyone but your actual loan servicer.

Making School Affordable and Attainable  
As your credit union, we can also help you pay for college. We offer a scholarship program,   private student loans through Student Choice, and alternative education loans to local trade schools.