Today, I have an awesome guest post from Molly Day. Read more about her at the end of the post.
The promise of a college degree is enticing. It’s a sure way to advance your career and gain more knowledge while expanding your network. But college degrees get more expensive each year making the thought of being a college graduate out of reach for many.
Potential college-goers are easy prey for scammers who offer attractive loans and scholarships that make the college dream seem affordable. With more sophisticated means of taking your money under the guise of offering student loans, you need to be smart about who you give information to and what you agree to in your loan search.
Student borrowers are also subjected to scammers who promise to eliminate student loan debt. Some companies engage in deceptive marketing practices and illegally charge customers hundreds of dollars to reduce or eliminate their debt.
A typical scam follows a pattern like this: you receive an email inviting you to a website from what seems like an official, government-sounding entity; something similar to your loan situation may be included, thus making it seem tailored to you. The website requests information such as name, social security number, and credit card information in order to receive a great deal on loan repayment or forgiveness. Before long, you may be charged thousands of dollars for a service that has done nothing to help you.
By educating yourself and following these tips, you may be able to prevent being the victim of a student loan scam.
1. Do Research and Ask Questions
A scam organization doesn’t usually have enough tools to fool consumers who are educated and ask questions, so be prepared to ask. Ask questions about what the fee is and what it goes toward so you don’t get duped into a monthly payment while your loans are in forbearance (something you could’ve done for free). You may just be able to expose a fake organization before they take advantage of you.
2. Read the Fine Print
Those lengthy terms and conditions that pop up when applying for a loan or scholarship are there for a reason – they usually contain important legal information that you need to know. Don’t skip it. Read these thoroughly and make sure you understand them before agreeing to anything. Don’t have time to read it now? Come back to it later when you do to make sure you don’t get caught up in a bad situation later on.
3. Don’t Pay Upfront
If a company is asking for an up-front fee from you or your parent, whether this is a “broker fee” or “processing fee,” ask why they don’t use the Free Application for Federal Student Aid (FAFSA). There should be no reason to pay to apply for a student loan.
If you need to pay to apply for a scholarship, take a look through their website to find out the history of the organization and how long the scholarship has been offered. Past recipients may be listed, so do some research to confirm these people are actual recipients.
For borrowers, the government offers information and free applications for changing repayment plans through their website. Research what is offered before a company tries to charge you for the same services. Some student loan consolidation scammers say they have a special relationship with the Department of Education and charge an initial application fee along with a monthly service fee to take advantage of their offer of debt relief.
4. Trust Your Instincts
Does the offer include a high loan amount with very low interest rates? Is the offer too good to be true? Then it probably is. Trust your gut when it seems like you’re receiving a great deal. Loan offers aren’t all bad, but if it seems like you’ve found the best deal with relatively little effort, you may be dealing with a fake organization.
With prospective students struggling to afford college and graduates unable to pay back their loans due to being unemployed or not earning enough to cover payments, scammers prey on this vulnerability and try to take thousands of dollars without ever being caught. It’s your responsibility to do the research and be wary of these types of schemes.
If you are suspicious of an organization that has contacted you, get in touch with the Better Business Bureau. You can research the organization by name to see reviews by other people. It’s possible they’ve contacted people in a similar situation as you and there may be others reporting them online.
If you’re in the UK, these tips still apply, or you can get help from the Student Finance UK Helpline.
About the Author:
Molly Day is the creator of StudentLoanDiary.com. Molly created her blog to help her stick to her goals and encourage other people to beat their student loan debt! Molly is working to pay off $30,000 in student loan debt over the next two years!