How to Avoid Student Loan Forgiveness Scams (and Find Real Options Instead)
While there are legitimate student loan forgiveness programs that will cancel your student debt, there are also plenty of student loan forgiveness scams out there.
If you’ve received a call that promised to cancel your debt overnight, or simply made promises that seemed too good to be true, you’ve probably encountered a scammer.
These scammers are out to steal your money, personal information or even online identity. Read on to learn about the signs of a student loan forgiveness scam and how to protect yourself, as well as some key details to watch for, such as:
Signs of student loan forgiveness scams
Although there are some legitimate student loan forgiveness programs that will cancel part or all of your debt, there are also plenty of student loan forgiveness scams.
If you’re trying to decide whether a program is real or a scam, here are a few red flags to watch out for:
1. Someone called you
People who are associated with legitimate student loan forgiveness programs don’t do cold outreach. In other words, they don’t take it upon themselves to call you and tell you about the loan forgiveness program.
Instead, you can learn about these programs on the Federal Student Aid website. You can also call your student loan servicer to discuss your options.
But if someone has called you on the phone to tell you about a “new student loan relief program” (like a COVID-19 forgiveness program, which doesn’t exist), chances are you’re dealing with a student loan forgiveness scam.
If this is the case, your best bet is to hang up and do your own research from trusted sources.
2. The promise sounds too good to be true
Another sign of a student loan forgiveness scam is a promise that sounds too good to be true. Legitimate student loan forgiveness programs have fairly strict requirements and usually require years of service before canceling your debt.
The Public Service Loan Forgiveness program, for example, requires 10 years of working in public service before canceling your loans. The Teacher Loan Forgiveness program asks for five consecutive years of working in a school before providing partial loan forgiveness.
If someone is offering a fast track to student loan cancellation, the offer, while tempting, probably isn’t real.
3. You’re expected to pay upfront fees
You should never have to pay anything to apply for a real student loan forgiveness program. You can find the paperwork online or ask your loan servicer for instructions.
While there are some legitimate student loan counselors who will charge a fee for their services, you shouldn’t have to pay for the loan forgiveness itself.
That said, if you’re struggling to manage your loans on your own, you might think it’s worth it to hire outside assistance. But if someone is demanding upfront fees in exchange for student loan relief, it’s probably a scam.
4. You’re being asked for sensitive personal information
Along with stealing your money, scammers might be trying to get their hands on sensitive personal information, such as your Social Security number or bank account details.
You should never share this data over the phone with someone who reached out to you. For instance, if someone is claiming to be your loan servicer, hang up and call your servicer back via its official phone number.
That way, you’re sure that you’re dealing with the actual company, and not an impersonator.
5. You’re feeling pressured
Finally, scammers might try to use high-pressure sales tactics to get you to act fast without thinking.
But there shouldn’t be any sense of urgency around applying for loan forgiveness. It takes time to learn the ins and outs of a real program and make sure you’re meeting its requirements.
If you’re feeling pressured to make a move, take some more time to do your own independent research.
How to block student loan robocalls
Student loan robocalls, whether as part of student loan forgiveness scams or as legitimate messages from your federal loan servicer, are becoming standard fare for borrowers and non-borrowers alike. Robocall-blocking service YouMail told LendingTree it counts about 165 million illegal student loan-related calls per month.
Here are four ways to stop them:
1. Add your number to a ‘Do Not Call’ List
You can register your phone number for free with the National Do Not Call Registry. The Federal Trade Commission (FTC) — the same agency that recently reimbursed 40,000 borrowers defrauded by relief scams — set up the registry in 2003.
However, as you might have suspected, it’s not unusual for student loan debt relief scammers to violate the Do Not Call Registry. Signing up might only stop legitimate telemarketers (including your real loan servicer) from calling your mobile phone or landline.
2. Employ a robocall-blocking mobile app
You might also have tried blocking a specific number using your smartphone, only to find robocalls reaching you from a different line. It’s common for spammers to call you from a number that matches your local area code.
To stop con artists and others from calling you from a variety of phone numbers, you might try robocall-blocking mobile apps such as YouMail, RoboKiller or Nomorobo. If you decide to use such a service, be sure to contact them when a robocall or text sneaks through — that could help them strengthen their security, according to the FTC.
3. Report any student loan robocalls
To ensure a spam call doesn’t happen a second time, don’t just notify your app operator, but also report the number to the FTC’s Complaint Assistant or via the Federal Communication Commission’s online form.
Likewise, if you receive a robotext, you can copy the message and send it to your smartphone carrier at 7726 (SPAM). That free service works for AT&T, T-Mobile, Verizon, Sprint and Bell customers.
While you’re at it, you could consult your carrier about the protections it offers from robocalls and texts. Here are some companies with security products and information specific to their phones:
4. Consider legal help
If your student loan servicer is the auto-dialing culprit, you might find that the calls or texts don’t stop, even after contacting their customer service and making your monthly loan payments.
The National Consumer Law Center cataloged such cases among the thousands of borrowers who have filed suit against their loan provider. At issue are your rights under the Telephone Consumer Protection Act (TCPA). To adhere to this law, telemarketers — even those working for loan servicers — must:
- Ask for your permission before robocalling you, and
- Include an opt-out or unsubscribe option during each robocall
If your rights are being violated, keep a record of your unwanted calls and voicemails. You might even seek a student loan lawyer. Consider the case of a Pennsylvania man who won a nearly $300,000 judgment after he sued Navient in 2017 for excessive robocalls.
Steps to take if you’ve been scammed
If you’ve fallen victim to a student loan scam, you may contact:
- Your bank or credit card company: You could seek to stop the payment to the scammer if you paid a fee upfront.
- The three major credit bureaus: You could report fraud or freeze your credit report to avoid future harm.
- The Office of Inspector General: You could ask for advice if your student loan information was compromised.
- The Consumer Financial Protection Bureau (CFPB): You could report the business and submit a complaint.
Why real student loan forgiveness can take a while
While there are legitimate student loan forgiveness programs out there, none of them will forgive your debt overnight. In fact, getting loan forgiveness is a lengthy process that only applies under certain circumstances.
It’s also only available for federal loans; forgiveness for private student loans doesn’t exist. So if someone is promising to erase your debt with a private lender, it could be a student loan forgiveness scam.
The only exception is student loan repayment assistance programs (LRAPs), which sometimes give you financial assistance to pay off both your federal and private loans. These typically come from a state or private organization.
Where to get legitimate student loan forgiveness
As mentioned, these six options are only for federal student loans — you’ll have to try an LRAP for your private debt.
1. Income-driven repayment
The Federal Student Aid (FSA) office offers four IDR repayment plans:
- Income-Based Repayment (IBR)
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Income-Contingent Repayment (ICR)
All these plans adjust your payments in accordance with your income. If you still have a balance at the end of your repayment term, the remainder will be forgiven.
- Maximum monthly payment: Generally 10%, 15% or 20% of your discretionary income, depending on the plan and when you borrowed
- Loans are forgiven: After 20 or 25 years of payments
2. Public Service Loan Forgiveness
The Public Service Loan Forgiveness (PSLF) is an option for professionals who work in public service. After 10 years of service, your loans will be forgiven.
But make sure you meet all the requirements of the program and submit an Employment Certification form each year. You wouldn’t want to get to the end of your 10 years only to find out you weren’t eligible for the program (as many borrowers found out the hard way).
- Maximum monthly payment: Dependent on your repayment plan, but you’ll need to put your loans on an IDR plan
- Loans are forgiven: After 10 years of payments on an IDR plan while working in a qualifying public service job
3. Teacher Loan Forgiveness
The Teacher Loan Forgiveness program is available for teachers who work in low-income schools or qualifying educational agencies. Through this program, you could get up to $17,500 in loan forgiveness, depending on what subject you teach.
- Loans are forgiven: After five consecutive years of qualifying work
- Loan forgiveness amount: Up to $17,500 for full-time, highly qualified teachers of math, science or special education; up to $5,000 for full-time highly qualified teachers of other subjects
4. Total and Permanent Disability Discharge
If you experience a total and permanent disability, you could qualify to get your entire federal student loan balance canceled. You might also be eligible for loan cancellation if you die or go bankrupt, or if your school closed or made fraudulent claims. You can read more about these student loan discharge programs here.
- Loans are forgiven: Upon proof of total and permanent disability
5. Perkins Loan cancellation
Although the Perkins loan program ended in September 2017, some borrowers still have Perkins loans that they borrowed before this time. If you do, you could get your Perkins loan canceled if you work in a qualifying profession for a certain period of time.
- Loans are forgiven: Upon proof of employment in a qualifying service career
6. Student loan forgiveness or cancellation by profession
Lastly, you’ll find other forgiveness programs for particular professions. Here are comprehensive student loan forgiveness guides for:
- Law enforcement
- Doctors, nurses and physician assistants
- Professors and teachers
4 more things you need to know about student loan forgiveness
Is federal student loan forgiveness real? Yes, with some caveats:
1. Not everyone is eligible
To be eligible for some income-driven repayment plans, for example, your payments must be lower than what they’d be under the standard 10-year repayment plan.
Say you earn $30,000 per year as a social worker but have $80,000 in debt because of your master’s degree. Tying your loan repayment to your income would keep your payments lower over a longer period. It would cost you more to repay the loan unless you qualified for loan forgiveness.
2. Forgiveness takes a long time
Depending on which program you’re pursuing, your student loans might not be forgiven for decades. In that time, you’ll pay more in interest than under the standard plan.
And remember: When it comes time to finally get your loans forgiven, your remaining balance might not be all that big.
3. Your remaining loans might be taxed
In the eyes of the Internal Revenue Service, a student loan that’s forgiven at the end of an IDR repayment plan is typically considered to be taxable income. So if you eventually manage to have $50,000 worth of loans forgiven, you might be on the hook for paying federal (and possibly state) taxes on that amount.
That said, the Biden-Harris administration waived taxes on forgiven student loans until 2025 with the American Rescue Plan, so you won’t have to worry about this tax bill if you receive loan forgiveness before then.
4. It’s not always worth it
As noted above, you might pay significantly more in interest if you opt for forgiveness through an IBR plan. Run your numbers through our IBR calculator to see exactly how much.
Since many student loan forgiveness programs require you to work in public service, you’ll likely earn a lower salary than you would in the private sector. You’d almost certainly earn a higher income as a lawyer for a firm representing name-brand clients than you would as an attorney for the government, for example.
How to pursue student loan forgiveness
If you’re struggling to repay your loans and think forgiveness is the right path for you, read our comprehensive guide to student loan forgiveness. See if you qualify for any existing options.
If none of the legitimate federal programs apply to your situation, consider putting your loans into deferment or forbearance. You may also refinance your loans with a private lender.
Along the way, be on the lookout for student loan forgiveness scams that are after your money, not your well-being.
Whatever you do, don’t ignore your loans. Because that’s the one way to ensure they never disappear.