"Student financing will be especially lucrative for scammers this summer and fall," says Steve J. Bernas, president and CEO of the BBB. "The scramble for financial aid gives scammers an opening to capture students' private, valuable information. Fraudsters will create fake email, texts and websites with offers of fast cash. They might even call you saying they are from the federal government."
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In September 2023, interest on student loans will begin to accrue again, and in October, minimum payments are set to resume. The BBB encourages students to carefully research trustworthy sources related to federal repayment plans before giving personal information.
"Watch out for companies promising to reduce debt by lowering payments through enrollment in student loan forgiveness or other programs," says Bernas. "They also could falsely promise to apply monthly payments to student loans and to improve your credit score - all you have to do is pay a small fee so they can negotiate with the lender on your behalf."
In another version, dishonest collectors claim they can save money by consolidating loans - if a minimal fee is paid. A company that claims it can erase student loan debt in minutes is not being honest. It is essential to keep your personal information private and never give it to an unsolicited source.
BBB Tips to avoid student loan scammers:
Research the lender. Visit BBB.org to read business profiles and check out companies before working with them. The FTC has consumer education related to student loan debt relief scams at https://studentaid.gov/
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Empty promises lead to an empty wallet and more debt. Only scammers promise fast loan forgiveness. Scammers also promise loan forgiveness for a fee. Never pay a fee upfront for help. Never share sensitive information, such as your FSA ID.
Find a reliable source. Consumers can apply for loan deferments, forbearance, repayment, and forgiveness, or discharge programs directly through the U.S. Department of Education or their loan servicer at no cost and do not require a third party.
Bernas notes, "Applying for grants and scholarships is a great way to help ease the financial burden of attending college. Due to the sensitive personal and financial information provided for scholarship and grant applications, it is important to be cautious when choosing one to apply for."
BBB recommends caution when dealing with companies that offer assistance in finding financial aid opportunities. A sudden offer of a grant or scholarship can look like a dream come true. But it could be bait for a scam. Students and their families should be wary of websites, seminars, or other schemes that promise to find scholarships, grants, or financial aid packages for a fee.
Scammers typically claim to represent the government, a university, or a nonprofit organization. The details vary, but the con is the same. The scammer will pose as a financial aid representative using words like "National" and "Federal" to sound more official. They claim you have won a scholarship or a grant (without ever applying) and ask for payment of a one-time "processing fee."
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To protect students and parents searching for financial aid opportunities from falling victim to scholarship scams, BBB recommends following these guidelines:
Beware of unsolicited offers. Typically, winning a scholarship or grant that wasn't applied for is impossible. Ask how the organization got your name and contact information, and then verify it with the source outside of the email, phone number, or website they used to contact you.
Take your time. Avoid being rushed or pushed into paying for help at a seminar. Use caution if a representative urges you to buy now to avoid losing an opportunity.
Ask your guidance counselor or a college financial aid office whether they have experience with the company.
If you have been a victim of a suspected scam, report it at BBB.org/ScamTracker. VisitBBB.orgor follow us @ChicagoBBB on social media.