Point Breeze Credit Union Blog

Beware of Debt Relief Scams When Looking for Student Loan Relief

Don't fall victim to these common student loan relief scams!

In October 2023, student loan payments resumed after a 3 year pause due to the pandemic. The process was confusing for many, with numerous loans being shuffled around to new loan servicers and little to no information being provided to borrowers.

Since then, scammers have seized the opportunity to take advantage of borrowers during their confusion and frustration. To avoid falling for debt relief scams, here are a few things to be mindful of.

What Scammers May Do

Pressure you to pay fees up front – Your student loan servicer will help you with your loans for free. Companies or individuals that request a fee are breaking the law. If a company is pressuring you to pay upfront fees or to sign a contract on the spot, it’s probably a scam.

Demand you sign a third-party authorization – Third-party authorization, or power of attorney, is a written agreement that gives a company or individual legal permission to talk to your loan servicer and make decisions on your behalf. They may even request you pay them monthly credit card payments, promising to pay it directly to your servicer. Beware of any company that tries to sever the communication between you and your loan servicer.

Promise immediate student loan forgiveness or debt cancellation – Debt relief companies do not have the ability to negotiate “special deals” with your creditors. If you have an income-driven payment plan, the amount you pay each month is set by federal law. Student loan forgiveness is only available through specific programs that can require many years of qualifying payments or other criteria.

Guarantee they can remove legally owed debt from your credit report – Debt relief companies or credit repair companies cannot remove debts that you legally owe from your credit report.

Ask for your Federal Student Aid information – To access information about your federal student loans, you have a unique FSA ID and password. Do not give that information away to anyone. If you do, you are giving them the power to perform actions on your student loan on your behalf. Your loan servicer or the Department of Education will never ask for your FSA ID or password.

Scammers can sometimes unlawfully obtain personal information about you from your credit report. So even if they claim to know your loan balance or other information, it may not be legitimate.

Legitimate Student Loan Relief Sources

At StudentAid.gov/repay, you can apply for different repayment plans, forgiveness programs and payment pause options for free. If you are struggling to get through to your servicer, you can have many of your questions answered on their website or at StudentAid.gov.

If you are ever unsure about the legitimacy of an offer for debt relief, don’t hesitate to call your loan servicer directly. You can also alert them and instruct them to only provide information about your loans to you.

If you were targeted by a debt relief scam, you can report it to the Federal Trade Commission, or your state’s attorney general.

For more financial tips, visit our blog page.