Borrowers have reported receiving phone calls, emails, letters, and/or texts offering them relief from their federal student loans or warning them that student loan forgiveness programs would end soon. Usually, the so-called student loan debt relief companies offering these types of services don’t offer any relief at all. Often they’re just fraudsters who are after your money.
Here are some examples of the false claims made in these communications:
- “Act immediately to qualify for student loan forgiveness before the program is discontinued.”
- “You are now eligible to receive benefits from a recent law that has passed regarding federal student loans, including total forgiveness in some circumstances. Federal student loan programs may change. Please call within 30 days of receiving this notice.”
- “Your student loans may qualify for complete discharge. Enrollments are first come, first served.”
- “Student alerts: Your student loan is flagged for forgiveness pending verification. Call now!”
Communications using this type of aggressive advertising to lure borrowers are NOT coming from the U.S. Department of Education (ED) or its partners.
Federal Student Aid offered an online event in November 2017 to learn more about avoiding loan scams:
Twitter Office Hours took place on Wednesday, Nov. 15, 2017, from 5–6 p.m. Eastern time: Federal Student Aid’s @FAFSA account partnered with the Federal Trade Commission (@FTC) to answer questions about repaying student loans and how to avoid debt relief scam companies. The event featured a “Twitterview” (a Twitter interview) of FTC experts, along with responses to a number of questions from tweeters. View an archived transcript of the conversation.
Here’s what you should know: there’s nothing a student loan debt relief company can do for you that you can’t do yourself for free. At no cost, ED and our federal loan servicers can help you
- lower or cap your monthly federal student loan payment;
- consolidate your federal loans;
- determine if you are eligible for loan forgiveness or other programs; and
- get your loans out of default.
Some of these companies have used the change in administration as a marketing tactic to lure borrowers, making claims such as “Act now! Obama loan forgiveness is going away!” ED’s loan forgiveness programs, such as the Public Service Loan Forgiveness Program, are still available, and you can apply for FREE. ED never charges application or maintenance fees, so if you’re asked to pay, walk away.
What are student loan debt relief companies?
How do student loan debt relief companies target federal student loan borrowers?
Is there a list of student loan debt relief companies that the government has taken action against?
How do I identify a student loan scam?
What do I do if I’ve already shared my information or paid one of these student loan debt relief companies?
How do I change my FSA ID password?
Are there legitimate private companies that ED works with?
Where can I go for free help?
Student loan debt relief companies are private companies that provide (or claim to provide) student loan management services for a fee. Often these companies are charging for services you can easily manage yourself. They will say they can help reduce your monthly payment or get your loans forgiven, but after you pay, you might be worse off. You might not get the promised help or your money back, and the company may have made changes to your loan repayment plan that you didn’t authorize or want. If you stopped paying your loans, your credit could be damaged and your loan balances could balloon.
The tricky part is that, although these companies are not affiliated with ED, they sometimes claim to be. In their communications, these companies will claim to “work with the U.S. Department of Education” or claim to be “consumer advocacy groups.” Remember: ED and our federal loan servicers will never charge fees to help borrowers with their student loans. If you’re asked to pay an up-front or maintenance fee, you’re not dealing with ED, so do not share your information.
If you’re not sure whether you can trust a company that contacts you, refer to this list of trusted companies that work with ED to provide student loan services.
Some borrowers have reported receiving phone calls, emails, letters, and/or texts offering them relief from their federal student loans. Student loan debt relief companies have also aggressively advertised on TV, online, in print, and through various other channels. In an effort to appear legitimate, some of these companies may even include your loan balance information in their communications. Always be sure to verify the source. If the communication didn’t come from ED or one of our partners, it should not be trusted.
The Federal Trade Commission (FTC) and other government entities have taken action against many of these companies. View the FTC’s list of companies and people banned from debt relief.
The problem is, many student loan debt relief companies operate under many different names and use many different phone numbers to avoid detection. Some even go as far as to reopen under different names after being sued or shut down. That’s why it’s important that you consult our list of trusted partners, and take steps to avoid these scams.
Here are some signs to help you identify a scam by a student loan debt relief company:
- They require you to pay up-front or monthly fees for help. It is illegal to charge an up-front fee for this type of service, so if a company requires a fee before they actually do anything, that’s a huge red flag—especially if they try to get your credit card number or bank account information. In some cases, they may even step in and ask you to pay them directly, promising to pay your servicer each month when your bill comes due. Free assistance is available through your federal loan servicer.
- They promise immediate and total loan forgiveness or cancellation. No one can promise immediate and total loan forgiveness or cancellation. Most government forgiveness programs require many years of qualifying payments and/or employment in certain fields before your loans can be forgiven. Also, student loan debt relief companies do not have the ability to negotiate with your federal loan servicer for a “special deal” under the federal student loan programs. Payment levels under income-driven payment plans are set by federal law.
- They ask for your FSA ID. ED or its partners will never ask you for your FSA ID password. Your FSA ID is used to sign legally binding documents electronically. It has the same legal status as a written signature. Do not give your FSA ID password to anyone or allow anyone to create an FSA ID for you. If a company has access to your FSA ID information, they can make changes to your account without your permission.
- They ask you to sign and submit a third-party authorization form or a power of attorney. These are written agreements giving the third party legal permission to talk directly to your federal loan servicer and make decisions on your behalf. Debt relief companies often want these authorizations so that they can change your account and contact information, so you don’t realize that they aren’t actually paying your monthly student loan bill.
- They claim that their offer is limited and encourage you to act immediately. Student loan debt relief companies often try to instill a sense of urgency by citing “new laws” or discontinuing programs as a way to encourage borrowers to contact them immediately. While there are some deadlines you need to meet in regards to your student loans—for instance, if you’re paying under an income-driven repayment plan, you need to recertify annually—our programs are limited only by the eligibility requirements.
- Their communications contain spelling and grammatical errors. While many of the communications sent out by these companies look very formal (for example, fold-and-tear letters with safety patterns), they often contain spelling and grammatical errors. If you notice unusual capitalization, improper grammar, or incomplete sentences in the communication you receive, that’s likely a red flag that the company is not affiliated with ED.
What do I do if I’ve already shared my information or paid one of these student loan debt relief companies?
You need to complete the following tasks:
- Log in and change your FSA ID. Do NOT share your new FSA ID password with anyone!
- Contact your federal loan servicer to revoke any power of attorney or third-party authorization agreement that your servicer has on file. You should also make sure no unwanted actions were taken on your loans.
- Contact your bank or credit card company, and request that payments to the company be stopped.
- File a complaint with the FTC.
- File a report of suspicious activity through the Federal Student Aid Feedback System.
Go to the “Manage My FSA ID” tab on the FSA ID site and log in using your username and password. Once logged in, click the “Change My Password” link. You’ll be prompted to enter your current password and choose a new password. Be sure to keep track of your new password and do not share it with anyone! If someone has access to your FSA ID information, they can make changes to your account without your permission.
If you cannot log in because you do not know your current username and/or password, go to the “Manage My FSA ID” tab on the FSA ID site and click “Forgot My Username” or “Forgot My Password” to retrieve it.
Note: To retrieve your username or password, you’ll either need to have a code sent to your mobile phone or your email address, or you’ll need to answer your challenge questions. If a student loan debt relief company had access to your FSA ID, it’s possible that they may have changed the email address or phone number associated with your account. If you don’t have access to or haven’t verified the mobile phone number or email address associated with your FSA ID, and you don’t know the answers to your challenge questions, you will have to contact the Federal Student Aid Information Center. An agent will walk you through self-service options. If that does not resolve the situation, you will go through the FSA ID verification process. You’ll send in copies of identification, and the email address on your account will reset to one you can access. This process takes 7–10 days from the point at which you send in your documentation.
Yes. There are private companies (lenders, servicers, and private collection agencies) that work on behalf of ED.
ED contracts with loan servicers who handle the billing and other services on your federal student loans. Your federal loan servicer will work with you on repayment plans and loan consolidation and will assist you with other tasks related to your federal student loan. Find a list of our loan servicers here. If you’re not sure who your loan servicer is, log in to “My Federal Student Aid” to find contact information for the loan servicer or lender for your federal student loans.
ED also works with private collection agencies (PCAs) to get federal student loan borrowers out of default and ensure defaulted borrowers are aware of their options. Here's a list of PCAs that work with ED. If you’re in default, please contact ED’s Default Resolution Group for personalized assistance at 1-800-621-3115.
These lenders, servicers, and PCAs are affiliated with ED and can be trusted, so you should contact them if you need assistance.
If you have questions or need help with your student loans, contact your loan servicer or lender for FREE assistance.