How do you spot a student loan forgiveness or relief scam?

What help is always free?

Federal Student Aid says the Department of Education and its loan servicers can help with all of the following at no cost.1 2

• Lowering your monthly payment or changing your repayment plan.1 2
• Consolidating federal student loans. The FTC says consolidating federal loans directly with the government is always free.1 2 3 4
• Postponing payments.1 2
• Checking whether you qualify for loan forgiveness or other programs.1 2
• Getting your loans out of default.1 2

So a company that charges to submit one of these applications is charging for something you can do yourself through StudentAid.gov or your servicer.3 4

What are the warning signs?

Federal Student Aid and the FTC publish overlapping lists. These are the signs they name.1 3 4

How do scammers make themselves look official?

Borrowers report calls, emails, letters and texts offering relief or warning that forgiveness programs will end soon. Federal Student Aid says messages using this kind of aggressive advertising do not come from the Department of Education or its partners, even when they claim to work with the Department or include your real loan balance.1

No company can get you a special deal. Federal Student Aid says debt relief companies cannot negotiate one with your federal servicer, that payments under income-driven plans are set by federal law, and that most forgiveness programs require many years of qualifying payments or work in certain fields.1

Some companies ask you to pay them instead of your servicer, promising to pass the money on, and then change the contact details on your account so you do not notice the bill is going unpaid. Federal Student Aid warns that if you stop paying your loans, your credit can be damaged and your balance can grow. Many of these companies also change names and phone numbers, and some reopen under a new name after being sued or shut down.1

Federal Student Aid warns never to give personal information by phone or online unless you made the contact. If a message worries you, your own servicer, found through StudentAid.gov, can tell you what is real for free.1 2

Is it legal to charge before any result?

The FTC says it is illegal for student loan debt relief companies to charge you before they help you.3 4

One rule in this area is the FTC's Telemarketing Sales Rule. It bars a seller or telemarketer from requesting or receiving a fee for a debt relief service until it has renegotiated, settled, reduced or otherwise changed the terms of at least one debt and the customer has made at least one payment under that agreement.5

What about claims that involve bankruptcy?

Be wary of anyone who says student loans can never be discharged in bankruptcy. The Justice Department's guidance records that servicers falsely told borrowers exactly that. A discharge is possible when repaying would impose an undue hardship, though it takes a separate lawsuit inside the bankruptcy case.6 7 8

Be just as wary of anyone who promises a discharge. The bankruptcy judge decides, and the government's position does not bind the court.6

What if you already paid one of these companies?

Federal Student Aid lists the steps to take.1

1. Contact your federal loan servicer to revoke any power of attorney or third-party authorization, and check that no unwanted changes were made to your loans.1
2. Ask your bank or credit card company to stop payments to the company.1
3. File a complaint with the FTC and report it through the Federal Student Aid Feedback Center.1
4. Log in to StudentAid.gov and change your account password.1
5. If you think your personal information was stolen, Federal Student Aid lists the Department of Education's Office of Inspector General Fraud Hotline, the FTC, the Social Security Administration and the three credit bureaus as the places to contact.1

Having paid such a company is not something to hide in a later bankruptcy case. The Justice Department's guidance lists engaging meaningfully with a third party you believed would help manage the debt as one of the steps that are evidence of good faith.6

Where is the real help?

For federal loans, with your loan servicer and on StudentAid.gov. If the loan is in default, the loan holder helps for free.1 2

For private loans, the FTC says to contact your loan servicer directly.4 3 2

For legal questions, including bankruptcy, the federal courts say people who cannot afford an attorney may qualify for free legal services, and they point to the American Bar Association's legal help page and the Legal Services Corporation.9 10