Student Loan Scams

Student loan scams are on the rise and scammers have become increasingly sophisticated, targeting young adults with student loan scams that promise quick fixes or threaten sudden penalties. Whether you’re new to borrowing or already juggling student loan payments, it’s essential to stay informed so you don’t fall for these schemes.

Scammers know students are stressed about owing tens of thousands of dollars in student loans, and they’re eager to dupe you with an “easy” way to get debt-free. Or, they might falsely claim you owe the feds taxes on your debt. If you’re already stressed about your student loans, that makes you an easy target.

Here’s what you need to know about the most popular student loan scams.

Student loan forgiveness scam

In this scam, a student loan debt company reaches out, offering to completely forgive your student loan for a relatively small fee. Your student loan, gone? Sounds like a dream! Unfortunately, it’s more like a nightmare. No student loan company would completely forgive your loan, even for a fee. The company is likely bogus and you’ve been targeted for a scam.

This scam attempts authenticity by mimicking Public Service Loan Forgiveness, a legitimate federal government program for public servants with federal student loans. They may even claim to be connected to the U.S. Department of Education.

If you fall for the scam, you’ll still need to pay off your loan, plus you’ll lose the money you shelled out. If you’re looking for student loan debt relief for your federal student loan, consider enrolling in a no-cost student loan repayment plan through the federal government. You might be eligible for student loan forgiveness for certain programs. See below for more information.

Top Federal Loan Forgiveness & Discharge Programs

There are some ways a student may be eligible for student loan forgiveness.

Public Service Loan Forgiveness (PSLF): Forgives remaining balances on Direct Loans for full-time employees of government or not-for-profit organizations after 120 qualifying monthly payments.

Income-Driven Repayment (IDR) Plan Forgiveness: Remaining balances are forgiven after 20 or 25 years of payments.

Total and Permanent Disability (TPD) Discharge: Discharges loans if a borrower is unable to work due to a physical or mental disability, verified by the SSA, VA, or a doctor.

Teacher Loan Forgiveness: Provides up to for teachers working in low-income schools for five consecutive years.

Borrower Defense to Repayment: Available if a school misled you or violated state law regarding your loan.

Closed School Discharge: Forgives loans if you were enrolled when your school closed or withdrew shortly before closure. FederalStudentAid.gov

Student loan consolidation scam

Similar to the above scam, a student loan company will contact you promising to consolidate your loan and lower your monthly payments, all for a modest fee. While many institutions can refinance student loan debt, the federal government is the only entity with the power to consolidate it, and they won’t charge a fee for this service.

If you’re looking to consolidate your student loans, check out studentaid.gov or call 1-800-557-7394.

Student loan tax scam

In this con, a scammer will spoof the IRS toll-free number and call a college student, claiming they owe thousands of dollars for a “federal student loan tax.” The scammer will demand immediate payment, threatening arrest or a lawsuit. They’ll also request specific forms of payment, like a wire transfer or prepaid debit card.

The “student loan tax” doesn’t exist. Plus, the IRS will never reach out to you by phone without first notifying you via snail mail, nor will they demand payment over the phone or insist on a specific payment method.

If you’re targeted by a student loan scam, it’s crucial you don’t engage with the scammer. Hang up as soon as you recognize a scam and delete any suspicious emails about your student loan in your inbox.

What to watch out for 

Let’s break down what you need to watch out for, plus how to take action if you’re targeted. 

• Keep your personal information safe: Never share your Social Security number, Federal Student Aid (FSA) ID, or bank details with anyone who contacts you unsolicited about your student loans. Scammers can use this information to steal your identity or access your financial accounts.
  
  
• Watch for fake emails and websites: Many scams use official-looking emails or websites to trick you into believing they’re legitimate. Always verify the sender’s email address and navigate directly to government sites like studentaid.gov instead of clicking links in messages.
  
  
• Understand legitimate loan processes: Only the federal government can forgive or consolidate federal student loans, and they will never charge you a fee for these services. Private lenders may offer refinancing, but consolidation through the Department of Education is always free.
  
  
• Get help if you’re unsure: If you ever feel confused or pressured, reach out to your college’s financial aid office or check resources from the U.S. Department of Education. They can help clarify legitimate loan programs and provide guidance if you receive suspicious communications.
  
  
• Know where to report scams: If you think you’ve been targeted, contact the Federal Trade Commission (ftc.gov), your local law enforcement, and the IRS for tax-related scams. Reporting helps protect not just you but other students, too.

Staying alert and informed will help you avoid costly mistakes and keep your student loan journey on track. Share this information with friends and classmates – together, you can stop scammers in their tracks.