There are quite a few different student loan scams that you will want to be aware of, because the last thing you want is to get ripped off in any way. Each year thousands of people fall for these scams, and they can cost you a lot of money if you don’t know how enough about them. A lot of student loan scams can seem legitimate at first, which is all the more reason to arm yourself with knowledge. By doing this you will be able to greatly reduce your chances of getting taken advantage of.
The Advanced Fee Scam
This particular scam involves a student loan company that tells you they will be able to get you the very best interest rate and loan terms, provided you are willing to pay a “small fee” upfront for the service. This fee can be anywhere from 1 to 5 percent of the total loan amount. Sometimes the fee is a flat upfront fee of a thousand pounds.
If someone tries to run this scam on you, or anything like it, you will want to avoid it completely. There are absolutely no circumstances in which you will ever need to spend any money to get money. Any legitimate student loans will never require any upfront fees, so you will need to keep this in mind.
There are two common fees that will be paid with a legitimate student loan, but they are never paid up front. You will find that federal student loans charge a 1% default fee, but there are no origination fees. If you are working with a third-party company to help you with student loan debt, they might take a fee up front. But even in this case, the fee will go into an escrow account, and the company does not get paid until they have helped you sign up for a program.
Loan Consolidation Scam
There is also the classic loan consolidation scam, which far too many people fall for every year. This scam involves a company charging a consolidation fee but not actually doing anything. This fee is sometimes referred to as a “processing fee” or “administrative fee.” If you happen to have a federal student loan, there are no fees for student loan debt consolidation. If you have a private student loan, there are many different lenders who will refinance it. Refinancing differs from consolidation in the sense that you are taking out a separate loan with a new lender who pays off your existing loans.
Law Firm Lawsuit Scam
Yet another student loan scam that a lot of people fall for involves a law firm claiming that they can settle your student loan debt. There are many variations of this scam, but usually a borrower is referred to a law firm by a “student aid company”. The student aid will promise you that this law firm will be able to take care of all your student debts for thousands less than you actually owe.
A lot of times the law firm will ask you to make your full student loan payment to the law firm itself. The firm says they will negotiate a settlement with your lender. What usually happens is that the law firm doesn’t end up making any payments while negotiating with your lender, and as a result you default on your student loans. At this point, the law firm claims you cannot pay the bills and tries to negotiate a settlement based on that. Many people end up falling for this scam, simply because they are so desperate to find out a way out of debt.
How to avoid getting scammed
The more information you have about common student scams, the more difficult it will be to fall victim to one of them. There are quite a few of these scams out there, so you will need to make sure that you do everything in your power to not fall for them. The more time you take to learn about these student loan scams, the easier it will be to recognize them. Sometimes these scams are so ingeniously designed that it can be very hard to identify them for what they are right away.