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Guest Robert Farrington

Student Loan Debt Elimination Scam

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Guest Robert Farrington

Student Loan Debt Elimination Scam
The important thing to remember about student loan debt is that it must always be repaid - it cannot be eliminated unless you have a federally qualifying reason (death, permanent disability, school closure, falsification of documents or identity theft). If you come across a company that promises to get your student loan debt eliminated, it is a scam!

We see these scams a lot relating to closed for-profit colleges and universities. Companies will advertise that, simply because you attended a certain college or university, you can get your student loans eliminated. This is usually false. 

There are many potential student loan forgiveness programs that you can read about here. If your school closed or is facing lawsuits, you can potentially do what’s called Borrower Defense to Repayment. But if you’re paying a company for help, ask them specifically what they are doing for you.

Scam Or Bad Service?
There are times when it's not a scam, but it just seems like one because the customer service is bad or paperwork gets “lost”. For example, I get a lot of readers asking about the FedLoan Servicing Scam. FedLoan isn't a scam, but just a poorly run student loan servicing company that is looking out for their own best interest.

Student Loan Servicer is actually the code word for “Student Loan Collection Agency.” Another one I get asked a lot about is NelNet, especially when it comes to their KwikPay Service. Once again, not a scam, just a poorly run program that is incentivized by the collection of full payments. 

I hope this helps you navigate the world of student loans a little better and avoid getting played. If you want to know more, don't forget to check out my Definitive Guide to Student Loan Debt.

Student Loan Relief Red Flags
Now that you know some of the main types of student loan relief scams, what are some red flags to look for?

Based on talking to consumers for several years, these themes have emerged:

Any company that claims to have a relationship with the Department of Education (third-party companies do not have any relationship with the Department of Education)
Any company that promises you a set payment or forgiveness (companies cannot promise forgiveness or guarantee an income based repayment because both will change based on your income)
Any promise of immediate loan forgiveness or cancellation
Any promise that a buyer will buy the loan and settle it for a set amount
Any promise that because your school closed or is being sued, you an get forgiveness

 

Is There Any Company You Can Trust To Help You?
Even though I’ve said countless times you can do it for free at StudentLoans.gov, there are still people who’ve asked me “that’s great Robert, but I still want to pay someone to help me – who can I trust?” That’s a fair question, so who can you trust?

Next, call your student loan servicing company. I know this sounds counter-intuitive, but 80% of issues and concerns can be resolved by simply calling your loan servicer. These free options are usually your best bet for help with student loans.

If you're still not quite sure where to start or what to do, consider hiring a CFA or CFP to help you with your student loans. We recommend The Student Loan Planner to help you put together a solid financial plan for your student loan debt. Check out The Student Loan Planner here.

Worried You're Being Scammed?
I hope this helps you navigate the world of student loans a little better and avoid getting played. If you want to know more, don't forget to check out my Definitive Guide to Student Loan Debt.

Are you worried that you could be dealing with a scammer? Stop by our new Student Loan Forum and post about it in the Student Loan Scams section. Protect yourself and protect others as well!

Readers, have you ever been the victim of a student loan scam?

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