Top 5 Student Loan Forgiveness Scams to Avoid in 2024

Student loan forgiveness scams have been a problem for many years. In 2017, the Federal Trade Commission (FTC) launched an initiative called “Operation Game of Loans” to combat scammers in the United States. The Biden administration recently announced an initiative to prevent scammers from taking advantage of borrowers trying to access student loan cancellation. While the government crackdowns did some good, fraudulent student loan forgiveness schemes have continued.

Fast forward to 2024, and outstanding student loan debt is now over $1.63 trillion. And as the pandemic has hurt so many people financially, the amount of people desperate to do something to get out from under the burden of student loans is certain to rise.

The short answer is that if you get a voicemail about student loan forgiveness or hear about a special program offering “Biden student loan forgiveness” or “Biden student loan relief,” it's probably a scam.

And know that the number of student loan scams will exponentially increase in 2024 once the White House decides to let repayments start again.

That said, we're going to outline the most common types of student loan scams, so you can watch out for your finances.

Why do student loan scams exist?

Paying off student loan debt is a major concern for most college graduates, no matter how much debt they have after finishing school.

Like for any pain point consumers have, there are legitimate businesses that claim to provide relief but are actually illegitimate operations that seek to take advantage of borrowers looking for a solution.

And because the student loan debt relief industry isn't highly regulated, student loan scammers have an open door through which to prey on unknowing borrowers.

Help for student loan relief is free

You may have seen Google or social media ads making outrageous claims of providing immediate relief from student loan debt. Generally, these private companies offer help with consolidating loans and other basic student loan services.

For federal student loans, most of these advertised services are things you can actually do for free. The U.S. Department of Education and your federal student loan servicer can help you with a variety of tasks, including:

• Consolidating your federal student loans
• Lowering your monthly student loan payments
• Applying for student loan forgiveness programs
• Getting your loans out of default
• Applying for forbearance or deferment

Although you can do many of these tasks yourself, some people aren’t aware of this or think it's more difficult than it is. Forms can also seem confusing to fill out. With so many options to consider, some borrowers can’t tell the difference between real student loan repayment strategies and scams.

5 Student loan scams to avoid

With little regulation, new “student debt relief companies” pop up all the time. They're often offering relief that seems too good to be true – which likely means it is too good to be true.

Student loan scams come in many forms, making different claims for service that sound attractive. Here are some of the more common scams we’ve come across:

1. Student loan consolidation scam

Sometimes it makes sense to consolidate your student loans; however, if you have federal loans, you can consolidate your loans for free on the Federal Student Aid website. There are also loan consolidation options if you have private student loans or a mix of private and federal loans.

Many scammers offer consolidating services for a fee, which is often referred to as a “processing fee.” It might also be referred to as an administrative fee or consolidation fee. Don’t fall into the trap of paying for something you could do for yourself for free. Avoid these fee-driven scams.

Be aware of how consolidation affects your plans for student loan repayment. A legitimate company will ensure you understand what you’re getting into before you consolidate.

For example, for people pursuing federal student loan forgiveness, it’s especially important to know that student loan consolidation could reset your qualifying payments count.

2. Student loan debt elimination scam

Quick student debt elimination is a myth. So if you receive a phone call or text messages from a student loan debt relief company promising fast debt cancellation, you're likely dealing with a scam.

Scammers might make a claim that because you attended a certain college that closed you can get your debt completely wiped out at a cost. While there are times when this is possible, you should not pay a company to try to get your debt eliminated.

For instance, the federal government may permit student loan debt discharge for special circumstances, such as disability, death, and if your school closed.

According to the Federal Student Aid website, StudentAid.gov, “If you’re no longer required to make payments on your loans due to other circumstances, such as a total and permanent disability or the closure of the school where you received your loans, this is generally called discharge.”

More recently, borrowers have been targeted by student loan cancellation scams.

For more details on student loan discharge and which loans are eligible, check out the Department of Education’s student loan forgiveness, cancellation and discharge criteria.

3. Advance fees scam

The federal government offers multiple services for free to student loan borrowers. But scammers often promise to be able to negotiate lower interest rates or better loan terms if you’re willing to pay a small fee upfront (spoiler: most likely, the fee isn’t actually small).

Fees sometimes are attached to student loans, both with federal loans and private loans. The issue in this scam isn’t that there is a fee; it’s that the scammer is charging you a fee upfront before providing any service.

That’s not how student loan repayment is supposed to work. Federal loans have origination fees, for example, but they’re added to the total amount of the loan, not a separate charge in advance. Additionally, you're also subject to a fee if you default on your loan.

Private loans usually have an origination fee or a disbursement fee. But, again, this fee is added to the total of the loan itself. In general, be careful any time someone wants to charge you upfront for a service related to utilizing federal programs, like the Education Department.

4. Lawsuit scam

With this scam, a law firm claims that it can settle your whole student loan debt. The lawyer will ask for money to take care of this for you, suggesting it can save you thousands of dollars in the process.

These people might even ask you to make your monthly payments to them under the pretense that they’ll negotiate settlements with your loan servicer. But, often, what actually happens is that the law firm never actually pays the federal loan servicers and loans are placed in default.

Once your loan is in default, the law firm argues that you can’t make your payments and then works to negotiate a settlement with your lender based on that lie. It’s unfortunate that law firms practice this. But people are so desperate to get out from under student loan debt that they want to believe these quick fixes are real.

Trying to settle your loan debt this way could cost you thousands of dollars in legal fees. Plus, you'll have wasted a lot of time that you could have used paying off your loans the smart, legitimate way.

Related: When Hiring A Student Loan Lawyer Could Be A Good Idea

5. Student loan forgiveness scams

Student loan forgiveness is the hottest topic in the student loan industry. It makes sense that scammers will try to make money off of unsuspecting borrowers by offering quick and easy student loan forgiveness.

There are many different ways to qualify for student loan forgiveness based on your situation, your career path, your place of employment and other factors. But, to be clear, none of those student loan forgiveness programs are easy or fast.

Public Service Loan Forgiveness (PSLF), for example, takes 10 years of qualifying loan payments before you can apply. Other student loan forgiveness options could take between 20 and 25 years through income-driven repayment. Loan forgiveness is not a quick and easy process. And any business that claims anything otherwise is probably a fraud.

Scammers do their best to make their ads, commercials, videos and websites look as official as possible. Be sure to investigate companies making any of these claims before handing over your money to them.

Other student loan debt relief red flags

Beyond the student loan scams listed above, there are other telltale indications you’re dealing with a student loan scam. Be on the lookout for these warning signs:

• High-pressure sales tactics
• Businesses that only offer loan consolidation and no other options
• Customer service with limited knowledge of student loan repayment options
• Use of the verbiage “document preparation service” in their marketing
• Requires you to provide sensitive personal information
• Aggressive advertising with outrageous claims
• Customer service that asks for your FSA ID or account information
• Official-sounding names and logos that make them seem connected to or part of the federal government
• Mentioning “Biden student loan forgiveness” a lot
• High, upfront fees that don’t match up to the services they are providing

Finally, beware of any companies that use pressure tactics that encourage you to act quickly. There are no “limited time” federal programs that are going away any time soon. So don't work with any company that tries to tell you that your “window of opportunity is closing.”

The benefits of paying for student loan consultations

There’s no magic wand to get rid of student loans quickly. Instead, you'll need to think carefully through your options to find the best repayment strategy.

You can go at it alone — for free — through the Federal Student Aid website. The reality is that figuring out which repayment option is best for you is complicated. If you find yourself feeling over your head with your options, it might make sense for you to invest in one of our one-on-one student loan consultations.

That's why Student Loan Planner® offers a paid service for advice related to your student loan debt repayment. We wouldn’t have a business if the federal government could solve every borrower’s debt problems. The reality is if you have six-figure student loan debt, your situation is very different from someone who has $20,000 in student loans.

We don’t have the answers to wipe away your debt in one fell swoop. Nor do we claim to provide immediate loan forgiveness. We're also not a document preparation company. We purposely don’t fill out any paperwork for clients. The more involved and educated you are in your own repayment decisions, the more focused you’ll be at eliminating your student loan debt the right way.

We charge a small, flat fee for a consultation, which we collect at the end after you’re satisfied with your repayment plan. We’ve been able to help 11,220+ clients take on over $2.5 billion of student debt. Contact us today for a consultation and we’ll help you find the right student loan repayment option to save you money.

You can now better identify student loan forgiveness scams!