Student loan forgiveness scams what to look out for

By Matt Mayerle
Modified on May 9, 2023
student loan forgiveness scams

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 debt 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 loan forgiveness scams, it is crucial to know what to look for when you are trying to find actual debt 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 balance 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.

Like other loans with monthly installments, student 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 student loan scams 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 debt 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 student loan scams 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 student loan debt 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 student loan repayment plans, refinance student loans, or see if you qualify for student 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 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 servicer 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 debt relief 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 loan servicer. Therefore, your loan 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 student 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 student 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

In the instance that you have already given a student loan forgiveness scam company any of your personal information or made a payment for fraudulent services, you will want to do the following in addition to filing a complaint with the FTC:

  • Change your FSA ID so you can prevent them from accessing your federal student aid account.
  • Reach out to your bank or your credit card company to ask that all payments to the company you gave your payment info to be halted.
  • Contact your loan servicer to ensure that no unwanted actions were taken on your behalf with your loans and to revoke any power of attorney or third-party authorization that now might be in your file. 

Getting Actual Student Loan Debt Relief

The U.S. Department of Education and authorized federal student loan servicers do offer legitimate student loan forgiveness programs to help borrowers struggling to make the student loan payments on their outstanding student loan debt. 

Additionally, there are ways to lower your student 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 loan repayment plans adjust the monthly payment on your student loans to be affordable for your income and your family size. And in some cases, if your income is low enough, your student 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:

  • Revised Pay as You Earn Repayment Plan (REPAYE Plan)
  • 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 student loan scammers!

Loan Deferment and Forbearance

Your student 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 student 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 student loan 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.

Teacher Loan Forgiveness

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 student debt relief and forgiveness. There are sure to be plenty of ways in which they can make the financial burden of your student loan balance easier to bear.


Student Loan Debt Statistics 
Avoid Student Loan Forgiveness Scams 
Student Loan Scams 
Income-Driven Repayment Plan 
What are loan deferment and forbearance? 
Should I consolidate my loans? 
Student Loan Forgiveness 

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