The latest student loan debt scam tricked 40,000 people.
Here’s what you need to know – and what to do about it.
Student Loan Debt Scam: What Happened
According to the Federal Trade Commission (FTC), the scammers allegedly used several Los Angeles-based companies, with names such as Grads Aid and United Legal Center, to steal millions of dollars from student loan borrowers. The defendants allegedly told borrowers that their company was affiliated with the U.S. Department of Education and if borrowers paid $1,000 upfront, they could permanently lower their monthly payment or receive student loan forgiveness.
As part of a settlement, the FTC is reimbursing about 40,000 affected student borrowers with $5.4 million.
Here’s what you need to know so you don’t follow in their footsteps.
Student Loan Consolidation Scam: What To Do
- If a student loan company says it has a “relationship” with the U.S. Department of Education, don’t work with them.
- Legitimate student loan companies clearly disclose that they are independent companies that are not affiliated with the U.S. Department of Education.
- Never pay a fee for student loan consolidation. Student loan consolidation is completely free through the federal government.
- Remember, student loan consolidation helps you organize your student loans, but does not lower your interest rate or your monthly payment. Visit Studentloans.gov or call 1-800-557-7394 for more information on student loan consolidation.
- If you want to lower your interest rate or monthly payment, then refinance student loans. Plus, student loan refinancing rates just got ridiculously cheaper.
Student Loan Forgiveness Scam: What To Do
- No third party student loan debt company will “forgive” your student loans.
- Don’t pay an upfront fee for student loan forgiveness.
- This scam sounds like Public Service Loan Forgiveness, which is a federal program for public servants with federal student loans. Income-driven repayment plans also can offer student loan forgiveness for federal student loans.
- You can report the scam to the Consumer Financial Protection Bureau (CFPB). You can also report the scam to the Federal Trade Commission (FTC) or call 1-877-FTC-HELP (1-877-382-4357).
- If your goal is to lower your student loan interest rate and monthly payment today, the best way to lower your student loan interest rate is to refinance your student loans. This student loan refinance calculator shows how much you can save when you refinance student loans.