Can You Spot Student Loan Scams? 3 Ways to beat them!

By on | Private & Federal Student Loan Consolidation.

It’s not easy to attend a college these days. The average cost of attending traditional college is more than $27,000 (and this does not include other costs). Even if students cut down on books, gas and food costs by attending an affordable online college, they still have to pay for tuition. Current inflation has made it impossible for most students to afford higher education and they need to apply for loans to pay for it. While there are many federal and private financial lenders that provide loans, there are just as many scammers out there looking to make quick bucks by deceiving students and their parents.
Here are the most common college loan scams and ways to beat them.

1. Student Identity Theft Scam

The most common type of scam is the student identity theft, where scammers try to pass of as legitimate colleges and hack your IDs and social security numbers which might be used by others to get a loan in your name. Another common type of scam is the phony scholarship scam in which companies try to lure you by offering scholarships that don’t exist. Just like there are diploma mills who try to pass of as accredited online universities by using similar logos, similarly there are some phony websites that present themselves as government agencies.
How to protect yourself: Don’t be fooled by them and don’t give out personal info unless you are very sure about them. In fact, it’s best if you check out their reputation through your local consumer protection agency.

2. Too Good to be True Offers

Most financial, loan providing institutions advertise themselves to reach their customers, through advertisements, tele marketing and increasingly through the internet. If you receive tele marketing calls that sound too good to be true, they probably are. Any ad or mail that promises really low interest rates or pressurizes you through claiming one time offers should also be looked at with skepticism.

How to protect yourself: Just remember:

  • FAFSA is free and always will be.
  • The Education Department does not send any kind of ads or mails to get people to borrow money.
  • Legitimate student loans do not charge upfront fees.

3. Loan Consolidation Scam

Another area that provides great room for student loan scams is debt consolidation. Students take out separate loans on books, tuition and other stuff and all this adds up quickly and becomes quite complicated when you need to pay back these loans, hence debt consolidation. However there are fixed and variable rates involved which may sound complex and complicated. Lenders jump on this lack of knowledge and force students to go for debt consolidation before interest rates go up which might be completely nonsensical.
How to protect yourself: Don’t rush into it. If you do decide to go for consolidation make sure you read the fine print, look at impositions and restrictions and conditional lowering of interest rates. Your consolidation might also be sold to other companies by your lender which might make you lose on the benefits. Ask the lender beforehand about this.
Don’t let a lack of knowledge be a reason for getting scammed into a loan nightmare. Measure all your options carefully and search your options at reputable banks and credit unions, you are sure to find one loan or the other that meets your needs and is legitimate.
This guest post has been written by Sally Croft who is a regular contributor to www.onlinedegreetalk.org where she advices students about affordable online degrees & distance learning education across US.