If you're considering using a paid service to help you deal with problem student loans, read this.
One of these programs was even being sold by an IRS-approved nonprofit charity that targets military members.
The approach seems to be similar: Sell consumers troubled with student loans some sort of hope or help.
The problem with these programs is they fail to inform consumers this is something they could do themselves, then charge fees that can range into the tens of thousands.
Student loan debt is a national tragedy. It is seemingly a financial black hole with few solutions. And if you’re in trouble with private student loan debt, the options are few: just what your loan servicer will offer.
But if you’re in trouble with federal student loan debt there are some good and reasonable solutions available directly from the government. These include programs that can discharge student loans completely in certain situations, like extended public service, teaching, military service, or permanent disability. There are also programs allowing consolidation of federal student loans into one, then having payments reduced to as little as $0 a month based on your income.
As an example of how much can be accomplished by contacting the U.S. Department of Education directly, one company I investigated even sent me a proposed repayment schedule that certainly appeared to have been directly copied from the government’s free online calculator.
Granted, there’s no perfect solution for student loan debt. But there are reasonable plans you should investigate on your own before paying needlessly for the same service.
That’s my issue: Student loan rescue companies too often fail to inform people of other options before selling them some “magic” service. People purchasing these expensive services aren’t making educated or informed decisions.
Don’t give your FAFSA PIN to anyone
Student loan assistance companies are also asking consumers for their FAFSA PIN number and logon information to log on to the consumer account. They then have the potential to take action as if they were the consumer. You shouldn’t allow anyone to access your account using your FAFSA PIN.
As the Department of Education warns:
Your PIN can be used each year to electronically apply for federal student aid and to access your Federal Student Aid records online. If you receive a PIN, you agree not to share it with anyone. Your PIN serves as your electronic signature and provides access to your personal records, so you should never give your PIN to anyone, including commercial services that offer to help you complete your FAFSA. Be sure to keep your PIN in a safe place.
If you have given someone your Federal Student Aid PIN, you should change it immediately. You can do it here.
Any company asking for your FAFSA PIN should raise a red flag and be an incentive for further research. To research any student loan rescue company, use this free guide.
Real student loan help
A series of free student loan articles, guides, and assistance can be found online here. They explain how to discharge federal student loans in some situations, how to consolidate federal student loans, and how to apply for an income-based payment plan.
I urge you to explore these options before paying any company claiming only they can do this.
Expect to see student loan rescue scams start exploding in the next couple of years. This problem will get worse in the near term and many will be scammed by student loan assistance companies before the Federal Trade Commission or Consumer Financial Protection Bureau takes action.
In short, when it comes to student loan rescue companies, buyer beware.