If You Have to Repay Student Loans, You’re Vulnerable to Student Loan Repayment Scams
You’re a recent college grad. You now have to worry about coming up with hundreds of dollars a month (or even more) to repay a federal government-backed tuition loan. So, the very mention that there’s an opportunity to write it all off for good is certainly going to attract your immediate attention. In simple terms, you’re vulnerable to student loan forgiveness scams. The problem is that it’s all a hoax.
Over most of the past decade, a plague of spam emails and aggressive online ads from student loan forgiveness scams have been circulating in cyberspace. They inform holders of outstanding student loans that procedures initiated by former president Obama now enable them to apply for one or more types of forgiveness plans. The ads direct applicants to web sites where they register for a fee. The fee is usually between 1%-5% of the existing principal. Some offer a fixed rate registration fee of as much as $1,000.
Usually the sites also ask the applicant to provide a power of attorney. Of course, they won’t admit it, but that will allow the scammers to make their money. The scammers have two options. One is to pocket the application fee and disappear. The second is to use the power of attorney to consolidate the student debt with higher interest rate loans and pocket the difference. In that case, you’ll wind up paying for it, for as long as it takes until you pay off the loan.
Loan Forgiveness and Loan Forgiveness Scams
One of the reasons why student loan forgiveness scams are so believable is that Congress did pass legislation during the Obama presidency that expanded certain existing loan programs. These changes capped repayments at between 10% and 15% of discretionary income in the event of a proven financial hardship. In such cases, assuming all payments are made on time, the balance will be forgiven after 20 to 25 years. So, when student loan forgiveness scams began to appear, people who searched the internet for “Obama” and “loan forgiveness” did find a reason to believe that the offer that they received was indeed legitimate. However, once the scam began to take a toll, articles about it began to proliferate.
There Are Plenty of Variations on the Theme
Another type of student loan forgiveness scams is disguised as an offer from a “student aid company.” The offer directs you to a law firm that claims it can reduce student loan debt by thousands of dollars. Should you agree, they’ll ask you to redirect your loan payments to the law firm itself. They promise to then negotiate a settlement for you with the lender. What they do, however, is pocket the money you send them every month until you to default on your loan. That will inevitably happen once you fail to repay your monthly payments for 270 days straight.
When you default, the law firm will attempt to negotiate a deal based on your impending bankruptcy. Neat trick. But as a result, your credit score will plummet. That, in turn, will prevent you from obtaining additional loans. And overdraft protection. Not to mention mortgages and credit cards. You might even not be able to rent an apartment. In the meanwhile, the law firm pocketed your change. There is no guarantee that your loan can be successfully re-negotiated and you’ll still have to pay it off or settle it one way or another.
Legitimate Loan Repayment Options Do Exist
We should note that various legitimate federal student loan repayment options do exist. And there is no fee for submitting an application. The URL to consult is StudentLoans.gov. Of course, there are also legitimate, outside financial professionals who provide consulting services to holders of student loans who seek to refinance them. If you want to select one, confirm in advance that he or she holds a proper license as a financial consultant. As a rule, the web site you consult about federal student loans must have a .gov URL suffix. If not, then it may be a student loan forgiveness scam.
If you think you’ve been the victim of a student loan forgiveness scam, contact the fund recovery experts at MyChargeBack.