If you are dealing with crippling student loan bills and are already defaulting on your payments, you may be looking for quick solutions to get you out from under your debt. Unfortunately, there are many fraudulent companies currently preying on people like you who are in debt and seek to take advantage of anyone in a desperate situation. This is why it’s so important for you to know how to recognize a scam so that you don’t get yourself any deeper in trouble. Before you decide to sign any contracts, be sure that you know exactly which red flags to look out for. Here is how to avoid college loan scams.
- Do a hefty amount of research.
You went to college, so you should know how to do your research at this point. You want to be sure that the debt consolidation company you’re considering has a good rating with the Better Business Bureau and they don’t have any inflammatory consumer complaints published online anywhere. You don’t need to have earned GW’s masters in public relations to know if the lender in question has an abysmal reputation.
- Never pay money upfront.
If a lender is asking you to pay money upfront in exchange for reducing or consolidating your debt, then there’s a very good chance that you are dealing with a scammer. Most lenders will charge you a fee that is based on the percentage of debt that they are reducing for you. If you pay a fee in the beginning, you can be almost certain that you have completed the end of your transaction with that so-called lender.
- If you decide to consolidate, confirm your debt is truly being consolidated.
It can seem very alluring to go with a lender that agrees to consolidate your debt so that you have just one monthly payment, but you want to be sure that when all is said and done, your overall interest rate is actually lower. And you also want to check that the lender is actually doing their job in paying off your other debts and not just pocketing your monthly checks for themselves.
- Don’t be fooled into thinking your debt has been forgiven.
There are all kinds of scams online purporting that your debt could be forgiven according to some kind of law that was passed by the Obama administration, but this simply isn’t true and just a marketing gimmick. These companies will ask you to pay a fee so that they can fill out the paperwork for you, but these clever scammers will just deposit your money and move on to another unlucky student that they can rip off.
- Never sign off on any contract that gives another person your power of attorney.
There are some companies that will trick people into giving them the power to spend the client’s money as they please. There is no easier way to legally invite someone to steal all of your money than by agreeing to give away power of attorney. There are occasionally some legitimate lending companies that will actually work in your favor, but you better do a lot of research and reference checks if you decide to go this route.