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Unfortunately, given the enormous amount of student loan debt in the United States right now, it’s to be expected that some unscrupulous companies are going to try and take advantage of stressed out consumers looking for a solution. So it’s worth remembering what is and isn’t possible when it comes to student loan debt, as well as the signs that a student loan "relief" program is very likely a scam.
For anyone toiling away under mounds of student loan debt (the class of 2016 left school with an average of just over $37,000 in student loan debt), the idea that your debt could just disappear overnight is an enormously appealing one. Unfortunately, it’s deeply unlikely.
Federal student loans (not private loans) can sometimes be forgiven or cancelled, but only under very specific circumstances. One of the most common is through the Public Service Loan Forgiveness (PSLF) Program, which may forgive the remainder of your debt after you’ve made “120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer,” per the Department of Education. That qualifying employer must be either a government organization, a tax-exempt nonprofit, or a non-tax exempt nonprofit, as long as their primary purpose is to provide certain public services.
Programs like PSLF require that you follow very particular guidelines – with PSLF you’ll want to complete and submit the Employment Certification for Public Service Loan Forgiveness form annually to verify that you’re making qualifying payments.
Review the information at StudentAid.Ed.gov, which breaks down all available options for the forgiveness or cancellation of federal student loans. It’s very important to know that, if eligible, you can sign up for any of these programs on your own, for free. You don’t need a third party (particularly one charging fees) to sign you up for any student loan repayment plans.
Upfront fees. There are certainly some helpful student loan education programs that may require an upfront fee, but you should always be wary of any program that requires sizable fees upfront before any service has been delivered. In fact, it’s actually illegal for any company promising student loan relief (i.e. lowering or settling your loans) to collect money upfront, before a service has been rendered.
Big promises. Income-based repayment plans and student loan consolidation may be helpful ways to manage your student loan payments, but as noted, actual forgiveness is rare, time consuming, often complicated. If someone is offering to slash your payments or completely cancel your student debts, be very wary.
Aggressiveness. Scams thrive in the absence of information. That’s why scammers tend to be pushy – they want you to take action before you’ve had a chance to review and understand all the important facts. Given the sheer size of most student loans, it’s perfectly reasonable (if not preferable) to take your time and make sure you understand what you’re signing up for. If you feel pressured to make an immediate decision – especially one involving your money – that’s a sign you may be talking to a scam artist.
Helpful student loan assistance programs exist, but if you’re looking for a miracle, you may be opening yourself up to a scam. Be cautious and realistic. If you need further assistance understanding your options, student loan counseling is available and can be a great starting point for anyone struggling to get their student loans under control.
The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.
Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.
The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.
The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.
The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.