Student loan forgiveness scams what to look out for

student loan forgiveness scams

When it comes to student loan forgiveness scams; consumers should be wary of lenders who claim they can completely eliminate student loan debt, who ask for payment upfront, or who don’t have an established business presence.  

Student loan debt is a burden that weighs heavily on a significant portion of the American 

population. With so many people eager for some kind of financial relief, it’s no surprise that scammers have been aiming to exploit that desperation for their own gain.

Unfortunately, student loan forgiveness scams are rampant and have already victimized many borrowers. The Federal Trade Commission has already filed suits against seven student loan forgiveness scam companies, but there will likely be even more requiring legal action in due time.

When it comes to student debt forgiveness scams, it is crucial to know what to look for when you are trying to find actual financial relief options so that you aren’t fooled by companies preying on vulnerable borrowers.

Why Do Student Loan Scams Exist?

As long as there are people in financial need, scammers will be looking to take advantage of any ounce of desperation they can sniff out. These student loan scams have become increasingly relevant as the national student debt has risen exponentially over the last two decades.

As of 2022, the student loan debt in the United States has reached a massive $1.747 trillion. The average student loan debt balance, including private student loans, is $40,904 per borrower. That is a lot of money, putting significant financial strain on over 40 million Americans, and making it particularly difficult for millennials to build credit.

Like other loans with monthly installments, school loans have monthly payments that can be too much for the student loan borrowers to afford based on their income. This has led to a student debt crisis that has left millions of Americans struggling to pay their bills each month. And as the balance continues to rise, dishonest businesses keep taking advantage of that struggle.

The Consumer Financial Protection Bureau is encouraging borrowers to be on the lookout for scams regarding student loans so they can report them and avoid losing money to empty promises made by these fraudulent companies.

Ways to Spot a Student Loan Forgiveness Scam

Student loan forgiveness scams have succeeded in convincing many borrowers that they were offering legitimate financial relief, so it’s understandable to be concerned that you might fall for a scam when looking for debt solutions. 

Fortunately, there are several ways to spot suspicious behavior right off the bat. We’ve outlined five red flags to watch for when researching or speaking to a debt relief company that can tip you off to the possibility that they are attempting to scam you.

Here are some common scams regarding school loan forgiveness you need to look out for:

Asking for Any Kind of Payment Upfront

Any debt relief company that asks for payment of any amount upfront should give you pause. Assistance relating to school loan financial relief that they might try to charge you a fee for is usually offered by your loan servicer at no cost.

Any unverified services asking for payment to lower your monthly payments, consolidate federal student loans, switch school loan repayment plans, refinance student loans, or see if you qualify for loan forgiveness are likely scamming you. All of these can be done with the help of the Department of Education or your official federal student loan servicer, who both offer entirely free assistance. 

Do not give your credit card number or bank account information to any debt relief company that wants to charge you any kind of upfront or monthly fees.

Promising Immediate Loan Forgiveness

All companies that promise immediate loan forgiveness or debt cancellation are not to be trusted, as no one can promise such a thing. These claims are fraudulent as most legitimate government forgiveness programs include years of student loan payments and qualified employment in a particular field before the debt is actually forgiven.

Requesting Power of Attorney or FSA Login Info

Many scammers insist that you enable them to work with your loan provider directly by asking for your FSA login ID and password or signing a power of attorney. You should never give out important personal information like login details or your Social Security Number to a company claiming they need it to assist you.

Allowing a private company to stand between you and your loan servicer by signing a power of attorney is never smart.

Claiming Affiliation With the Federal Government

Some scammers attempt to appear legitimate by making it look like they are affiliated with a government agency. These companies might place logos of the Treasury Department or the Department of Education around their website, and some might even claim that they’ve partnered with a government agency to offer relief services.

None of these appearances or claims are true in the least. The U.S. Department of Education partners with no outside organizations outside your federal student loan servicer. Therefore, your servicer is the only one authorized by the federal government to assist you with payment plans, consolidation, and forgiveness qualifications.

Pushing You To Make Quick Decisions

High-pressure sales tactics are a method these debt relief companies use to push you into making hasty decisions. They might pressure you to act quickly by claiming their offer is only available for a limited time or a deal is set to expire. Getting you to act fast works in their favor as it gives you less time to research whether the services they’re offering are legitimate.

How To Report Student Loan Scams

If you are a victim of a loan scam or seriously suspect a company is scamming others, you will want to file a complaint immediately with the Federal Trade Commission (FTC).

The FTC has already taken legal action against these school loan debt relief companies:

  • A1 DocPrep, Inc.
  • American Student Loan Consolidators (ASLC)
  • Alliance Document Preparation
  • Student Aid Center
  • Strategic Student Solutions
  • Student Debt Doctor (SDD)
  • Student Debt Relief Group (SDRG)

What To Do if You’ve Been Scammed

Actions to TakeDescription Who to Contact
Change your FSA IDPrevent scammers from accessing your federal student aid account. Federal Student Aid (FSA)
Halt PaymentsAsk to stop all future payments to the fraudulent company. Your bank or credit card company. 
Check Loan StatusEnsure no unwanted actions were taken on your loans. Your loan provider. 
Revoke Power of Attorney/Third-Party Authorization Revoke any permissions that may have been granted to the fraudulent company.Your loan provider. 
Disclaimer: Please note that this table is a simplified guide, and it’s important to take immediate action if you suspect you have been a victim of a scam. Additional steps may include monitoring your credit report and considering a credit freeze if necessary.

Getting Actual Student Loan Debt Relief

The U.S. Department of Education and authorized federal student loan servicers do offer legitimate federal loan forgiveness programs to help borrowers struggling to make school loan payments on their outstanding school loan debt. There are more than three million Americans who are eligible or approaching eligibility for student loan forgiveness.1 

Additionally, there are ways to lower your school loan monthly payments with your servicer. These options are entirely free to apply for through your official loan servicer.

Income-Based Repayment

Most federal student loan servicers offer some kind of income-based repayment plan that you can apply for. If you are struggling to make your monthly payments with your income, then it’s likely that you will qualify for a significantly lower monthly payment by just applying.

Income-driven student repayment plans adjust the monthly payment on your school loans to be affordable for your income and your family size. And in some cases, if your income is low enough, your school loan payments could be $0 a month.

Even better, most loan servicers offer variety in their income-driven repayment plans to fit all federal student loan borrowers’ unique needs. The four repayment plans based on income include:

  • Pay As You Earn Repayment Plan (PAYE Plan)
  • Income-Contingent Repayment Plan (ICR Plan)
  • Income-Based Repayment Plan (IBR Plan)

These payment plans can be accessed directly through your federal loan servicer at absolutely no cost. Do not be fooled into thinking a private debt relief company is needed for this, as they are likely just school loan scammers!

Loan Deferment and Forbearance

Your loan servicer also offers temporary student debt relief options like loan deferment and forbearance. When you are going through a rough financial patch, you don’t need to resort to extreme solutions when the federal government ensures you have ways to ease the strain briefly while you get back on your feet.

Getting a loan deferment puts a temporary suspension on your school loan payments, just on the principal if unsubsidized and on the interest if subsidized. The difference in forbearance is it allows borrowers who don’t qualify for deferment to suspend payments on principal only or reduce their monthly payment for up to a year.

Consolidating Your Federal Student Loans

You can consolidate multiple federal student loans into one by applying for a Direct Consolidation Loan. Getting a Direct Consolidation Loan with the help of your loan servicer requires no application fee, and there is no need to pay any private companies to assist you.

Loan consolidation can make your balance easier to manage by giving you one monthly payment instead of multiple. Loan consolidation can also give you longer to repay your loans, thereby lowering your monthly payment. 

However, it is essential to weigh your options carefully and look into both the pros and cons of consolidating before making a decision, as some benefits can be lost, and there might be a more significant accrual of interest.

Student Loan Forgiveness Options

The Department of Education offers several federal programs for loan forgiveness so you can avoid being tricked by any debt forgiveness scams altogether. Unlike student aid scams, most forms of loan forgiveness, cancellation, or discharge can be done directly through your federal loan servicer without any mediation or fee.

These are the primary student loan forgiveness programs available:

Public Service Loan Forgiveness

You can qualify for the Public Service Loan Forgiveness Program (PSLF) if you are employed by a government or not-for-profit organization. This program will forgive the remaining balance on your federal direct loans after you have made 120 qualifying payments while working for a qualifying employer.

Financial Relief for Teachers

You could qualify for the Teacher Loan Forgiveness Program if you teach full-time for five complete and consecutive academic years in a low-income elementary school, secondary school, or educational service agency. The Teacher Loan Forgiveness Program could forgive your loans up to $17,500 after completing the allotted time of full-time teaching.

If you are unsure about which of these relief options might be the best fit for you, simply log in to your Federal Student Aid account to determine who your loan servicer is. Contact your loan servicer directly to talk through the options available for financial relief. There are sure to be plenty of ways in which they can make the financial burden of your student loan balance easier to bear.

FAQ: Scams Regarding Student Loans

What are the common signs of scams regarding federal school debt forgiveness?

– Unsolicited debt forgiveness offers via over the phone loans, email, or mail.
– Promises of immediate debt forgiveness or debt cancellation.
– Requests for upfront fees or monthly maintenance fees.
– High-pressure sales tactics urging immediate action.
– Requests for personal information such as your FSA ID or Social Security number.
– Guarantees of debt forgiveness without reviewing your specific situation.

How can I verify if a school debt forgiveness offer is legitimate?

– Contact your loan servicer directly for information about legitimate government forgiveness programs.
– Check the official Federal Student Aid website for accurate information on debt forgiveness programs.
– Be wary of any company that claims to have a special relationship with the Education Department.

Should I ever pay an upfront fee for help with my federal student loan forgiveness?

No, you should never have to pay an upfront fee for assistance with repayment or forgiveness of federal student loans. Legitimate assistance through your loan servicer is free.

What should I do if I receive a suspicious offer?

Do not provide any personal information or make any payments, report the offer to the FTC and your state attorney general’s office, then contact your loan provider to report the incident and for further guidance.

How do I protect my personal information from scammers and avoid student loan forgiveness scams?

– Never share your FSA ID or Social Security number with anyone who contacts you.
– Regularly change your passwords and use two-factor authentication where possible.
– Monitor your credit report for unusual activity.

What steps should I take if I’ve already responded to a scam offer?

– Change your FSA ID password immediately.
– Contact your bank or credit card company to stop payments.
– Notify your loan provider to check for any unauthorized actions and to revoke any third-party authorizations.
– File a complaint with the FTC.

Can a private company really fast-track my debt forgiveness application?

No, private companies do not have the ability to expedite the forgiveness process. Only your loan provider and the Department of Education can manage your loan application.

Where can I find reliable information about school debt forgiveness?

The official Federal Student Aid website is the most reliable source for information about loan repayment and forgiveness options.

How can I report a school debt forgiveness scam?

– Report scams to the FTC at
– You can also contact your state attorney general’s office and the Consumer Financial Protection Bureau (CFPB).

A Word From CreditNinja on How To Avoid Student Loan Forgiveness Scams 

CreditNinja encourages everyone to avoid student loan forgiveness scams by keeping a sharp eye out and doing thorough research before committing to any kind of student loan debt relief program. It’s also important to research your options before signing onto any kind of loan, whether it be a personal loan, installment loans, or even bad credit loans

You can learn more about finding legitimate financial relief options and making the most of your current budget at the CreditNinja dojo. There, you’ll find tons of financial resources and tools available for free! 


  1. Student Loan Forgiveness Statistics [2023]: PSLF Data | Education Data
  2. Student Loan Debt Statistics | Education Data 
  3. Avoid Student Loan Forgiveness Scams | Student 
  4. Student Loan Scam | Student 
  5. Income-Driven Repayment Plan | Student
  6. What are loan deferment and forbearance? | Student
  7. Should I consolidate my loans? | Student
  8. Student Loan Forgiveness | Student
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