The Student Loan Ranger has discussed before the so-called
"debt relief" companies that target student loan borrowers. Due to
the volume of questions we've been receiving on this topic, however, we thought
it might be worth revisiting.
What most of these emails have in common is the subject
line, which usually reads, "Is this a scam?" While we can't opine on
individual companies, we can try to give you some key questions to ask to try
and evaluate these organizations yourself.
1. What is the fee? Let's be clear – just because an
organization charges a fee to assist borrowers with their student loans doesn't
make them a scam. It's how transparent the fees are and how clearly they
explain what you will get for that fee that's important.
The Student Loan Ranger has seen too many borrowers who
thought they were making payments to their loan every month of, say, $39, only
to find out that the company they had worked with simply put the loan in forbearance,
meaning no payments were due at all.
The $39 was a "monthly fee" to keep the loan in
forbearance. In reality, eligible borrowers can obtain forbearance for free
from their federal loan holder, often with a phone call, for up to 12 months at
a time and no fee is charged.
Others have paid $600-$2,500 to "get their loans out of
default and on a zero-dollar payment plan," only to have the company
facilitate a federal consolidation with another forbearance – options the
borrowers could have done themselves with maybe two phone calls and an online
application, for free.
The borrowers haven't been put on a payment plan at all, but
given a temporary postponement, which will actually likely increase the
balance.
2. What will they be doing for that fee exactly? The bottom
line is that many of these services, transparent or not, are charging for
"document processing" services. You can usually find language to that
effect in the fine print at the bottom of the Web page or agreement.
If you want to pay someone to fill out an application for
you, that's your prerogative. Just make sure you know exactly what is being
promised for that fee you're paying, and that the fee is reasonable for the
work being performed.
3. Can they get you the "Obama Student Loan Forgiveness?"
OK, this one's a trick question. There is no such thing as the Obama Student
Loan Forgiveness Program, but this phrase seems to pop up in every ad we've
seen for not-so-transparent companies. So if they tell you yes, they absolutely
can get you that program, it might be time to move along.
Any legitimate student loan counselor will be quick to
explain that such a program does not exist, but be able to explain in detail
the eligibility requirements for those programs, such as Public Service Loan
Forgiveness and income-based repayment, that do exist.
4. Are they asking for your National Student Loan Data
System PIN or FSA ID? This one is a bit backward as it's a question they'd ask
you, not the other way around – but it's still a big warning sign that this
organization may not have your best interests at heart.
The U.S. Department of Education takes privacy and
information security very seriously and has made it clear that only certain
entities are allowed access to student loan information. If the organization
you are working with needs your full loan info, they will teach you how to
access it yourself rather than risking violation and asking for the PIN,
password or FSA ID.
A similar red flag is when they request you fill out a power
of attorney to give them permission to act on your behalf with your loan
servicer. While it is expected that they may need written permission to allow
your loan holder to speak with them about your student loans, some entities are
using these power of attorney forms to change the address on the borrower's
account to their own, ensuring the borrower is kept in the dark as to their
loan status.
Never allow an organization to do this. If the loan should
go past due or default, you would still be the one to suffer the consequences,
even if someone else was "managing" your account.
The Student Loan Ranger has said it before: There's not a
person or entity on the planet that can get a borrower access to a federal
benefit or lowered payment on their federal loan that they can't get for
themselves, for free, directly from their loan holder. There are also plenty of
free services available to Education loan for MBA
borrowers who have questions or may be struggling.
And remember: If something sounds too good to be true, it
probably is.
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