How to Identify Student Loan Scams

Top Student Loan Scams

How to Identify Student Loan Scams

You've done the hard work of getting enrolled into a program and taken the first steps towards changing your future. Financing should be the least of your worries - but unfortunately, there are people who want to profit off of you.

The Consumer Finance Protection Bureau (CFPB) has issued multiple warnings about student loan scams where students are being taken advantage of with the promise of having their student loans drastically reduced or forgiven altogether. If something seems like it's too good to be true - it probably is. We've created a guide to how you can recognize these top student loan scams before you sign on the dotted line.


If you have federal student loans, there are several options that are provided to you free of charge if you run into issues making payments on your loan. The CFPB issued a warning against companies who are pretending to have a relationship with the Department of Education that will help you make lower payments - but in reality, they're simply charging you an abundance of fees to enroll in the program on your behalf.


No matter what, debt relief companies are't able to negotiate with federal student loan creditors to get you a "special deal." Federal law mandates the thresholds for income-driven payment plans, so there is no negotiation possible.

In terms of loan forgiveness or cancellation, there are certain programs that may help you, but they have strict guidelines and require many years of qualifying payments or special employment.

Bottom line: If a outside company promises to have your loan forgiven or cancelled, it's a scam.


Your interest rate is perhaps the most important number when it comes to your student loans: it determines how much you will pay for your financing. Naturally, the lower the interest score - the more quickly you'll be able to pay off your loan, so it makes sense for you to try to lower your rate.

Some student loan scams promise you a lower interest rate, while making you pay an additional fee up-front. Sometimes this fee is a flat number, and other times it is a percentage of your existing loan balance. Either way - it's a fraud, and the company will simply enroll you in the free assistance programs that are already available to you.


Enrolling in repayment and forgiveness programs for federal student borrowers is completely free, and you can do it at For some, the signup process can be confusing or too time-consuming - so there are options available for you to pay someone to complete the forms for you. Before you sign any forms, make sure the assistance company is reputable.


If you have private student loans, refinancing can be a good idea. When you refinance your loan, you are taking out a new loan with a new lender (at a lower interest rate than your existing loan), and your new lender is paying off the balance of your pre-existing student loan. This is not a scam - and is often a good idea if you have a track record of making on-time payments, and a good credit score.



If you think you've fallen victim to a student loan scam, submit a complaint to the CFPB via this form, or call them at (855) 411-2372.

Next, explore your options if you're behind on your payments. The CFPB has a set of online resources to guide you through getting back to date on your payments or removing the default status from your credit score.

Originally published July 24, 2018.