College loan con artists can cast a net and catch millions of potential victims.
That’s because more than 40 million Americans owe more than $1.2 trillion in college loans, according to the Consumer Financial Protection Bureau. In 2014, 70 percent of graduates left with their diplomas, and loans worth $33,000.
If college debt is part of your financial life, be warned. Scammers are looking for people concerned about paying their loans, and they’re offering some too-good-to-be-true solutions.
Here’s what you need to avoid a costly ruse.
NEVER PAY UPFRONT
There are legitimate companies that can help you manage your student loan debt, and none of the work comes for free.
Real lenders won’t ask for money upfront. Instead, they will usually base the fee on a percentage of the debt they help with.
If they ask for a fee upfront, say no.
DO YOUR RESEARCH
Before you sign on with any company that promises to help with your loans, make sure they’re the real thing.
Do some research on search engines and see what you can learn about the company. Google the company name and “consumer complaints,” and see if it has a listing on the Better Business Bureau site.
Find out how long the company has been around, and make sure it has a track record before you sign on.
If you’re being pressured to hurry up and sign paperwork, that’s a red flag.
FORGIVENESS DOESN’T COME EASY
Want to get rid of your student loans forever?
Unfortunately, it’s not so easy to have your student loans forgiven or cancelled, but that’s not what the scammers want you to believe.
It’s true that certain loans can be cancelled for certain individuals, such as military personnel, teachers, nurses, child care providers, or borrowers affected by the closure of a school, according to the Department of Education. But provisions differ depending on the type of loan you have, and the circumstances are very specific.
Scammers, though, may promise to help you whatever your personal situation and whatever kind of loan you have. They may promise they have the “secret” to make it happen, quickly and painlessly, as long as you pay the required fee.
And no, there is no special provision passed by President Obama or Congress, despite what spam email may tell you.
Before you consider trying to make your loans disappear, make sure you learn the rules from the Department of Education website or from your loan’s servicer.
WE’LL TAKE CARE OF EVERYTHING
Some fraudsters will tell you that by signing a few papers, they will take care of everything.
Sure, they’ll take care of everything, but not to your benefit.
If you give these scammers your loan numbers and other personal information, such as your Social Security number, birth date and your home address, they can do lots of damage. They may apply for new loans in your name, but when the checks arrive — to the scammer’s address, of course — they’ll spend the money and you’ll be even deeper in a hole of debt.
Never sign a power of attorney or any other document that gives someone permission to act on your behalf. While there are legit companies who offer to help, you had better think twice — no, three times — before doing business with an unknown entity. Do your research and make sure it’s a company that gets results.
If you trust the wrong company, you may have just handed over your personal information for a fraud free-for-all. Fake student loans could just be the beginning.
Also know that you can, on your own, do most of what legit firms offer to do for you, and it won’t cost that dreaded fee.
WE’LL COMBINE YOUR LOANS
You may be able to combine or consolidate all of your student loans so you only have to cope with one monthly bill and one interest rate. And if the interest rate is lower, you could save money over the length of the loan.
Sounds like a slam dunk, but moving all the debt to a private lender may mean you have to give up some of the protections of your government loans. That means you really need to know what repayment benefits your current loans offer, and then you must compare that with the new loan’s protections, if there are any. For example, your current lenders may be able to offer more flexible payment options — such as suspending or lowering payments — if you ask. Make sure you know what you can do before you look elsewhere.
If you’re considering a consolidation, make sure you know that the interest rate offered is the one you will get. You don’t want to be tricked into consolidating for a bigger interest rate.
Also know there are also companies that say they will consolidate your debt, but they never do. When you consolidate, the new lender will pay off your old loans. A scammer won’t do that at all. They’ll gladly take your monthly payments on the “new” loan while you’re still receiving bills for your old loans. When you ask, the scammer may tell you, “Oh, we paid that. It may take several months for their systems to update — you know the government — so just ignore those bills.”
But if you do ignore them, you be delinquent on loans that the scammer never paid off, and you’ll also be out the cash and fees you paid for the new (fake) loan.
If you consolidate, make sure you have proof that the original loans were paid off. Don’t just rely on the paperwork from the new lender, but call your original lender and make sure the records match. Then, if you get a bill for an overdue loan, don’t ignore it. Follow up.
For more on student loan consolidation, spend some time with the Department of Education’s website.
BEWARE OF SOCIAL MEDIA
Social media sites, including Facebook, Twitter and Instagram, are popular shopping locations for scammers in need of new victims.
Search engines are big targets, too,
Shortly after the Consumer Financial Protection Bureau took action against a few supposed student debt relief companies, the agency asked Google, Yahoo! and Bing to keep an eye out for suspicious lender ads that come up when consumers use keywords such as “student loan default” and “student loan forgiveness.”
Surf with care.
Have you been Bamboozled? Reach Karin Price Mueller at Bamboozled@NJAdvanceMedia.com. Follow her on Twitter @KPMueller. Find Bamboozled on Facebook. Mueller is also the founder of NJMoneyHelp.com.