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Common Student Loan Scams and How to Beat It

These days, going to a college for most of the students is not easy in the terms of finances. The average student has to pay more than $25,000 for the basic costs of education, not to mention additional expenses like transport, housing, books, etc. For most of the college students it is impossible to afford post secondary education without taking different student loans. At the same time as there are numerous private and federal student loan lenders that student can borrow from, there are just as many scammers out there you should be aware of when considering applying for a student loan. They are looking for making quick money by betraying college students and their parents, and even colleges and government. Achievements in the technology development today, especially Internet expansion make these scams easier than ever. Bear in mind that the student loan scams are flourishing today. Before applying for student loans, college students and their parents must be thoroughly informed about different borrowing solutions, their interest rates and repayment conditions. With the intention of helping you identify and avoid them, we have made a list of the most common student loan scams and the best ways to beat them.

1. Student Identity Theft Scam

This type of student loan scam is the most common one. The point is that the scammers try hacking your personal information like social security number and ID which can be used by other people to get a student loan in your name.

An additional frequent sort of scam is the fake scholarship scam in which companies try to tempt you by offering scholarships that really don’t exist. They use similar logos as accredited universities or even present themselves as government agencies. This type of student loan fraud often involve high amount of scammed money, totaling to hundreds of thousands or even millions of dollars and Department of Education puts hard effort in making sure that loan funds reach the intended borrowers.

To protect yourself, be aware of these and don’t, under any circumstances, give out your personal data if not totally sure about them. Actually, it is the best if you check out their standing throughout your local consumer protection agency.

2. Loan Consolidation Scam

Very often students take diverse loans on tuition, books and other expenses and at some point decide to have their separate loans consolidated and lower their monthly payments, since they find it difficult to pay back these loans separately. Often consolidation terms and conditions may seem complicated and difficult to understand, so lenders may take advantage of borrowers’ lack of knowledge in these matters and persuade them to go for debt consolidation. In fact, they offer false loan consolidation programs that do nothing. The loan consolidation scam is actually about an impostor getting you to split over money, supposedly to cover fake processing, administrative or consolidation charges.

To avoid this type of scam, make sure that you totally understand student loan consolidation conditions and interest rates and choose to consolidate your loans with an agency of good reputation.

3. Offers Which Seam To Good To Be True

Large number of loan providing organizations promotes themselves through different advertisements, internet and phone marketing. If you find advertisements or receive telemarketing calls that sounds too good to be true, they probably are. All the marketing that promises extra low interest rates or to favorable terms and conditions should alert you to be skeptical and careful. To protect yourself, keep in mind a few things:

  • The Department of Education does not send any types of mails, aids and similar advertisement to attract people to borrow money
  • FAFSA is free service
  • Valid student loans do not charge open fees.

4. The Advance Fee Scam

With this type of student loan scam, fake lender offer student loans but tell potential borrowers that they first have to pay a fee in order to secure their loan. The fee usually is about 3-4% of the loan amount. Be careful! In case you receive this type of offer, which requires you to give money in order to get money, it’s probably scam. Legitimate federal and private student loan lending companies do not charge origination fees.

5. The Debt Elimination and Bankruptcy Scam

Under this sort of student loan scam someone will untruly state that they can release your student loan debt – for a price. They will offer you to get your student loans cancelled and ask you to pay a certain amount of money for that service. Don’t answer to such mails or calls! Students can get their loans cancelled only under certain conditions, e.g. if they qualify for a loan forgiveness program under federally issued student loans, such as teacher student loan forgiveness plan, so such claims are a dead giveaway of fraud and you should be very alert for these.

A variation on The Debt Elimination scam is The Bankruptcy Scam, which means that someone will say to you that they can discharge your student loan debt in bankruptcy court. After that they are going to try to get you to pay “legal” fees or other costs related to a bankruptcy filing.

To protect yourself, be aware that dissimilar to credit card debt, student loan obligations can’t be given up for lost in a bankruptcy and don’t involve yourself with offers like these.

As a general rule, you should always carefully check out your potential student loan lender’s reputation and be totally sure that you understand all their borrowing terms and conditions before signing any contract. If you have troubles to understand any information, we advise you to ask for help. Inquire at your college about available student loan options and other financial aid for students alternatives like college grants or student credit cards. There are different lawful and secure options to borrow money for your academic expenses, so don’t get yourself involved in student loan scams by making deals with unreliable individuals or lending agencies.

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