Home > Student Loans > 4 Student Loan Scams to Watch Out For

Comments 23 Comments

There’s been a lot of recent buzz around the price of college education and no one seems to be able to escape the heat of tuition costs anymore. Adding fuel to the fire are scams that seek to exploit young borrowers. Which is why you should be aware of the prevalent scams that affect students applying for student loans and scholarships — as well as graduates who are in student loan repayment — and what you can do to make sure you don’t fall victim to them.

Scams to Watch Out for If You’re a New or Continuing Student

Are you just starting college? Applying for loans and scholarships for the first time can be an arduous and confusing process. Luckily, there are plenty of free resources available to help you.

  • FAFSA — this is the form you have to fill out to apply for federal aid (including loans and grants). Never access this anywhere else (including FAFSA.com, which is a known scam) and never pay anyone to fill it out for you. This form is free and if you need help filling it out, visit your school’s financial aid office. Need more help? Visit The Federal Student Aid page of The Department of Education’s website for information on how the FAFSA works.
  • Scholarships — just like your FAFSA form, don’t pay anyone to help you with scholarships. You can find a myriad of scholarship opportunities on Fastweb.com that range from scholarships for high GPAs, for people of a certain heritage, for those involved in specific extracurriculars, and more. Any website or person that wants to charge you, guarantee they can get you a scholarship, or asks for money to hold a scholarship is definitely a scammer.

Red Flags: Beware of anyone that charges a fee, guarantees a certain result or reward, asks for your financial information to “hold” a scholarship, pressures you to make a quick decision, claims to have an inside track on gaining a scholarship, won’t give you detailed information on what you’re applying for, claims you won a scholarship that you didn’t apply for, and anything that sounds too good to be true.

Scams to Watch Out for If You’re in Loan Repayment

Are you a college graduate? If so, now’s the time to start thinking about student loan consolidation. But how can you know that the consolidation you’re seeking is legitimate? Only get your information through trusted resources:

  • Federal Loans — These should be consolidated through The Federal Direct Program. This will lock in your interest rate and make available a variety of payment plan options based on your situation. There are even other programs like The Public Service Loan Forgiveness Program which were created to help those in specific career fields (such as public service fields like teachers, police officers, non-profit workers, and more) so talk to your lender to see what you’re eligible for.
  • Private Loans — You can consolidate private loans through your lender or shop for one with better rates. FinAid is a trustworthy place to find a comprehensive list of options and lenders. It is also possible to consolidate your loans by rolling them into a home loan or home equity line of credit, but of course that only works if you’re currently a homeowner.

Red Flags: Beware of any program that claims it will eliminate your six month grace period, claims they can discharge your debt quickly and easily, tells you that you can discharge your debt by sending a check to your lender with the memo line “For the Discharge of Debt”, or pressures you into a quick decision.

Once you find the right program and are all set to pay off your student loans, be sure to research how to get started on your payments and stay on track.

This story is an Op/Ed contribution to Credit.com and does not represent the views of the company or its affiliates.

Image: iStockphoto

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Nette F Olander

    FAFSA is free

  • Donna

    Received paper work in the mail through . They actually was able to get all my Federal Loans down by 54%. I was required to pay them in two payments of $349.50 each. Is this a scam. They said they would notify my lenders and that the government would take over the loan and I would have to pay for 90 days. A little afraid of this.

    • http://www.Credit.com/ Gerri Detweiler

      We cannot comment on specific companies, and we have removed the company’s name from your comment. It is unclear what services they are providing but be careful. The federal government says you should not have to pay anyone to apply for programs that help you reduce federal student loan payments. If these are federal loans then it sounds like they are recommending consolidation or Income-based Repayment. You can go directly to StudentAid.Ed.gov to apply yourself at no cost if you choose.

  • Shevawn Hillwig

    My daughter sent for info through a company Income@Student Loan Support.us. Wondering if legit. A gentleman called her, left his name and she has a phone number. I told her to have him send all the info to her, to not give anything over the phone at all. If she does talk to him to say she needs to have her attorney go over it all since he takes care of her money situations. Can you tell me have you ever heard of them? are they a good company? have there been any problems with them? They are saying she is to send them the loan payment then they make arrangements with her institution to fix and lower her student loan payment. After so many payments then the rest is forgiven I guess…

    • http://www.credit.com/ Credit.com Credit Experts

      Well, the Better Business Bureau gives them a D+. You can get that information here: http://www.bbb.org/san-diego/business-reviews/financing-consultants/student-loan-support-in-costa-mesa-ca-100068844/

      You are wise to advise your daughter not to give information out over the phone. There certainly seems to be evidence of some unhappy customers.

      • Shevawn Hillwig

        Thank you so much for your reply. I have passed on the info to her!

        • http://www.credit.com/ Credit.com Credit Experts

          You’re welcome. You can also suggest to your daughter that she go to studentloans.gov and apply for loan forgiveness programs herself.

    • Nette F Olander

      if they are federal loans then you go thru them and they can fix it, lower it ,etc.

  • http://www.credit.com/ Credit.com Credit Experts

    Call your state attorney general’s office and tell them about the offer your son received. There are genuine loan forgiveness programs, but this doesn’t sound like one, but people don’t generally contact you to ask if you’d like to avail yourself of one. You can read more here:
    Student Loan Forgiveness Programs.

    Hope that helps. Owing a lot on student loans can feel overwhelming, but being scammed and still owing the student loan debt is worse.

  • http://www.Credit.com/ Gerri Detweiler

    You are welcome!

  • Sandra

    Oh my gosh I just talked to these people the other day and I decided to hold off and think about it….. What did they say to your daughter? Did she go through with it??! I’m wondering if I should …

  • http://www.Credit.com/ Gerri Detweiler

    I just don’t know enough to tell you one way or the other but I am suspicious – there are not a lot of ways to save money on student loan payments, and the ones that exist like Income Based Repayment are free, so what exactly are they offering? I’d suggest you visit GetOutOfDebt.org where Steve Rhode is very good about checking out possible credit scams.

  • Malerie

    is the “student payment relief” a scam?

    • http://www.Credit.com/ Gerri Detweiler

      I don’t know what you mean by that. Can you elaborate?

  • Pingback: Why You Should File Your FAFSA Now ← WORLD NEWS()

  • jeff

    Its been a few years but i believe the F in Fafsa stands for
    Free … don’t pay anyone.

    • http://www.Credit.com/ Gerri Detweiler

      Yes you are correct. It does.

  • Patsy Robbins

    Some one has used my name and identification information and applied for a student loan. I have contacted my congressman, several attorneys , the credit bureaus, and a CPA. No one is willing to help me . I did get results from my congressman—I recieved a letter from Sallie Mae stating that there were no student loans in my name with the Department of Eductaion or with Sallie Mae. This has gone on my credit, and it is making my life so difficult. Can you please give me some advise or direction in which I may go next?

    Thank you for your help !

    Patsy Robbins

    • Sarah


      I’m a consumer credit counselor for a non profit. You can get help by finding an agency near you cccs.org.

      You can also dispute the information on your credit report by going to each of the credit bureau websites or annualcreditreport.com

      You can also freeze your credit so it cannot be accessed by anyone. There is a small fee to freeze and unfreeze, but you will have peace of mind. If you need to access credit then you unfreeze it.

    • http://www.Credit.com/ Gerri Detweiler

      Patsy – This sounds like a case of identity theft. Have you obtained a police report and provided it to the credit reporting agencies with your dispute? If not you need to take those basic steps.
      What Should I Do If I’m a Victim Of Identity Theft

  • Sherry

    I didn’t look at FAFSA.com, but it definitely sounds fishy. If your tax return is finished, the FAFSA is a piece of cake to fill out – mine took literally less than 20 minutes. Why in the world would you pay someone to “maintain” the paperwork, anyway? The figures will probably change every year, due to tax variations, and you can always pull up previous years’ info from the real FAFSA website. Last thing I want is some company having access to my tax info and social security number. Just make it a 1-2 chore every year: tax return and then FAFSA.

  • joanna

    Why is FAFSA. com a scam? If you pay a one time fee to have them maintain the paperwork for the extent of the undergrad years that is one less thing you have to remember to do. Do they not fulfill their end of the deal for the full undergrad years?
    I got to them by mistake and I was so overwhelmed I thought one thing off my plate for the next four years would be worth it. Please fill me in. Thank you for your information.

    • Kay

      Joanna, how are they maintaining paperwork for four years? What paperwork? You must complete the FAFSA every year. Once you complete the application, print a copy and stick it in a notebook, that’s it. Or save it to your computer. It is easy to complete the FAFSA when you have completed your tax return by putting in your social – this is a new feature – the tax information from your return is automatically imported. I do not know Fafsa.com but I cannot see any reason to need anything other than the official site which sends your report directly to the schools of your choice with no fees involved. A potential scam is that you just gave your social and your child’s social to someone???? plus perhaps paid a fee….I would be concerned.

    • Dee

      Because it’s fafsa.gov

  • Pingback: Why You Should File Your FAFSA Now | ComparePlastic()

  • Pingback: Why You Should File Your FAFSA Now | Credit.com News + Advice()

  • Pingback: 4 Student Loan Scams to Watch Out For()

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team