Types of student loan scams and their warning signs

A student stands in between two bookshelves in a library, reaching up to grab a book on the top shelf on the right
August 15, 2024 | Ben Heinze

With so many students needing financial assistance to help pay for higher education, student loan scams are unfortunately common. Scammers prey on those in need by tricking those looking for genuine student aid into something fraudulent. Learn more about common student loan scams and the warning signs to look out for.

What you’ll learn:

Types of student loan scams

Upfront fee scams

Some scammers advertise a paid service claiming to help students find potential student aid or fill out forms such as FAFSA. While there can be legitimate services that charge for additional help and information regarding student aid, many of these services are not worth it or are outright scams.

Be extremely cautious if a company wants you to pay upfront costs for help obtaining student aid. University financial aid offices will be happy to assist you and answer questions for free, and forms such as the FAFSA are free.

Student loan forgiveness scams

Due to Student loan forgiveness being a hot topic and many people with large amounts of student debt struggling to repay their loans, scammers frequently utilize student loan forgiveness scams. These scams often trick their targets into sharing financial information, such as their bank account numbers and Social Security number, thinking that this is required to receive student loan forgiveness. Alternatively, scammers may attempt to convince their targets to make an initial payment to receive forgiveness.

While student loan forgiveness programs exist, they don’t operate in the ways scammers want you to believe they do. No student loan forgiveness program will ever require a payment to get started, and any required financial information should be entered through an official, secure online portal.

Student loan repayment scams

Besides complete forgiveness, many student loan programs exist to allow for consolidation or payment plans that greatly increase the recipient’s ability to pay. Like other upfront fee scams, many repayment scams target victims by convincing them to pay a fee to consolidate or change their payment plan. These services are free through the U.S. Department of Education and federal loan servicers.

If someone contacts you about a student loan consolidation or alternative payment plan, be cautious of their claims. Studentaid.gov has information on the repayment options available, including who is eligible and how to change your payment plan.

Warning signs of student loan scams

Student loan scams are nefarious, but many warning signs are similar to those of other of scams. Be on the lookout for any of these red flags.

Additional fees

While you may have to pay back any student loans you’ve taken out, another fee on top of your monthly payment is a huge warning sign of a potential scam. You can obtain loan assistance at no cost, and federal loan servicers can work with you on any repayment or consolidation plans without any fees.

Asked to provide sensitive financial information

Always be on guard if anyone asks you to provide sensitive financial information, such as your Social Security number or bank information. While this information can be required on certain forms, it should only be provided on a secure online portal, not because someone claiming to help you with student aid asked for it.

High-pressure tactics

Scammers often use high-pressure tactics to get what they want, hoping their target’s desperation or concern of an opportunity passing by will cause a lapse in judgment. Don’t let this happen to you! No student aid is time-sensitive enough to warrant these high-pressure tactics, and loan servicers aren’t going out of their way to pressure people in this way.

Too good to be true

Student loan debt is a major financial issue for many, and victims are unfortunately susceptible to promises that their problem could go away. Loan forgiveness and repayment plans that make it easier to pay exist, but the claims made by scammers are often too good to be true, promising total forgiveness in any circumstances. Legitimate loan forgiveness programs have many limitations and qualification caveats, such as requiring years of qualifying payments or only a specified amount of debt to be forgiven. If you need student loan forgiveness, you can find legitimate opportunities on studentaid.gov.

What to do when targeted by a student loan scam

Being targeted by a scam can be unnerving, even if you don’t become a victim. Here are the steps to take:

  • Report the scam: If you encounter suspicious activity or a scam, go to https://studentaid.gov/feedback-center/ and follow the on-screen prompts to report the fraud. You can also submit a report to the Federal Trade Commission and your state’s Attorney General.
  • Change your username and password: If you believe there’s a chance someone has access to any financial or student aid accounts, update your username and password for those accounts immediately. Remember to create a strong password that’s difficult to guess.
  • Cancel fraudulent payments: If a scammer convinced you to schedule a fraudulent payment, immediately contact your financial institution to block this payment. Your financial institution should have policies and procedures to handle these situations and protect your funds.
  • Contact your loan servicer: Prompt communication with your loan servicer is necessary so they are aware of the fraud and can take steps to ensure the scammers cannot continue to defraud you.
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Whether you are a soon-to-be student or have graduated and are paying off loan debt, awareness of student loan scams is vital to avoid becoming a victim. Pay close attention to potential warning signs of a student loan scam and always report and take measures to protect yourself if targeted.


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