Four Warning Signs That a Student ‘Debt Relief’ Company May Be Trying to Rip You off
Last week, the Consumer Financial Protection Bureau announced that they would be shutting down one fraudulent student “debt relief” company, and suing another. It’s pretty scary that these companies exist, but it can be tough to tell that they’re trying to pocket your money. The following tips were were written by the CFPB and should help discern the good from the bad.
Warning signs that a student loan debt relief company may be trying to rip you off:
- Pressure to pay high up-front fees. It can be a sign of a scam when a debt relief company requires you to pay a fee up-front or tries to make you sign a contract on the spot. These companies may even make you give your credit card number online or over the phone before they explain how they’ll help you. Avoid companies that require payment before they actually do anything, especially if they try to get your credit card number or bank account information. Not only is free assistance available through your student loan servicer, many times taking payment for debt relief services before providing help is illegal.
- Promises of immediate loan forgiveness or debt cancellation. Debt relief companies do not have the ability to negotiate with your creditors for a “special deal” under these federal student loan programs. Payment levels under income driven payment plans are set by federal law and, for most borrowers, loan forgiveness is only available through programs that require many years of qualifying payments.
- Demands that you sign a “third party authorization.” You should be wary if a company asks you to sign a “third party authorization” or a “power of attorney.” These are written agreements giving them legal permission to talk directly to your student loan servicer and make decisions on your behalf. In some cases, they may even step in and ask you to pay them directly, promising to pay your servicer each month when your bill comes due.
- Requests for your Federal Student Aid PIN. Be cautious about companies that ask for your Federal Student Aid PIN. Your PIN — the unique ID issued by the U.S. Department of Education to allow access to information about your federal student loans — is the equivalent of your signature on any documents related to your student loan. If you give that number away, you are giving a company the power to perform actions on your student loan on your behalf. Honest companies will work with you to come up with a plan and will never use your PIN to access your student loan information.
How to get help:
Submit a complaint online or call us at (855) 411-2372 if you have been the victim of a student loan debt relief scam or if you are getting runaround from your student loan servicer. You should also instruct your student loan servicer that they should only provide information about your student loan directly to you.
If you have questions about repaying student loans, check out Repay Student Debt to find out how you can tackle your debt – even if you’re in default. You can learn about your options, and what you might want to specifically ask for when speaking with the company attempting to collect from you. Another great resource to visit is Ask CFPB for answers on many more of your student loan questions.
Even if you’ve fallen behind, you may have options:
There are federal student loan repayment programs that can help remove the default status from your credit report. Be sure to learn about what’s available through our tools before paying hefty fees for something that likely won’t live up to your expectations or that you can get for free.