BBB Warns of Recent Increase in Student Loan Scams

If you are among the 43 million borrowers in the U.S. with student loan debt, you might be paying closer attention to headlines lately.

With tuition prices climbing steadily over the past decade, the national student loan debt has ballooned to $1.75 trillion- a $1 trillion increase from just ten years ago. This exponential growth, coupled with the COVID-19 pandemic, has prompted government intervention in the form of federal student loan forbearance and serious talk of forgiving sizable chunks of this debt.

Unfortunately, all the attention being paid to this issue has also opened the door for unscrupulous businesses and scammers trying to take advantage of the situation.

Third-party companies offering debt relief and document preparation services have come out of the woodwork to help student loan borrowers consolidate their debt and/or apply for various government assistance programs. These companies collect upfront fees and often monthly “maintenance fees,” promising to consolidate loans, set up repayment plans, or even forgive loans.

But these companies do not always fulfill their promises (or have the authority to do so) and they may not disclose important information about their services. One key fact they may fail to disclose is that all of the services offered are available free of charge to qualified borrowers directly through the Department of Education.

Scholastic Solutions, one such document preparation company claiming to be in Cheyenne, Wyoming, has generated 29 complaints and 20 negative customer reviews in the past six months. Customers report being misled to believe company employees were representing the Department of Education. They allege being charged hundreds of dollars upfront (and monthly fees thereafter) for services that are not clearly explained.

Complaint narratives make it clear that many of these borrowers are confused about what they are signing up for and are certainly unaware the programs offered by Scholastic Solutions are available elsewhere for free.

Another concern lies in the sheer amount of personal information Scholastic Solutions and companies like it collect from their customers. Borrowers are often required to provide bank account information, social security numbers, addresses, and other sensitive personal information. Some customers are even required to provide Federal Student Aid IDs and login credentials so that the debt relief/document preparation companies can access their accounts directly.

Providing all of this data exposes borrowers to identity theft and potential fraud for years to come. This type of information is regularly bought, sold, and traded on the black market by criminals looking to obtain credit cards, open new financial accounts, file fraudulent tax returns, and engage in endless other illicit activities.

There are legitimate options if you need help with your student loan debt. Your loan servicer may be able to help lower your monthly loan payment, change your repayment plan, consolidate multiple student loans, postpone monthly payments, and even see if you qualify for loan forgiveness or other programs.

Contact your student loan servicer directly by visiting the Department of Education’s website which lists the contact information for approved loan servicers.

Key Tips to Remember

• Watch out for third-party companies requiring upfront fees for services. You don’t have to pay to receive help with your student loan debt.
• Never provide your FSAID or student loan servicer login information to anyone. Legitimate loan servicers and government agencies will never ask for this information.
• Be sure you know who you are communicating with and ask questions if you’re not positive. Look for the .gov extension to ensure you are on official government web pages.
• Being asked to sign over Third-Party Authorization or Power of Attorney is a huge red flag. There are very specific, rare reasons you would ever need to do this.
• Take your time to research and weigh options before making any decisions. Scammers and unscrupulous businesses will urge you to act quickly by making the situation seem dire.
• Review a business’s BBB profile before deciding to do business with them.

For additional information and help from the Federal Student Aid office, visit studentaid.gov.