U.S. Student loan debt is at crisis levels and scammers are making a profit

Student with a heavy load. Screen capture by USA Today

Student loan debt in the United States has reached a real crisis, with more than 45 million college students struggling under the massive weight. Collectively, this debt has skyrocketed to more than $1.5 trillion, surpassing all other types of household debt other than mortgages, reports the American Federation of Teachers (AFT).

“Nearly one in four federal borrowers are in default or struggling to stay current on their loans,” the AFT notes. “When they fall behind on their payments, the consequences are dire: negative credit reports, wage garnishment and diminished options to cure defaulted loans.”

And with all this stress, scammers haven’t failed to notice. The Better Business Bureau (BBB) is reporting a definite uptick in student loan debt consolidation scams, according to King5 News in Seattle. Because this issue is at the forefront of so many young lives, scammers are trying to make the best of a terrible situation.

“A lot of students are getting out of college right now and are looking to have the lowest payments they can or they want to be able to pay or they want to pay off their debt as fast as possible,” says Tyler Russell of the BBB.

Recent statistics show that members of the class of 2017 who borrowed money owe about $29,000 in student debt, and the number is rising. And scammers know this too. They often use this information to help separate people from their money. Russell confirms the BBB is seeing more college loan consolidation scams, with about 50 victims across the country. That may not sound like much, but he says it’s a sure sign there are many more.

Scammers resort to emails, phone calls, text messages, and even letters, Russell said. They often claim to have helped others and promise to offer a lower rate while lowering payments. Then they claim that all you have to do is pay them a fee up front. And that is definitely a red herring.

“Those scammers like using those high-pressure tactics to say hey, you’re not going to be able to get the things you want to have in your life so if you don’t pay this down, they create that sense of urgency, so people will act quickly without doing research,” Russell says.

What really happens in these cases is that scammers take the fee and run, meaning you’ll never see that money again. Which is why you should never pay a fee, he added. Instead, ask lots of questions and do your research.

“Know your options, if you’re having trouble paying back your student loans, know what options are out there,” he says. “If there’s a loan alleviation program within your university or with your lender, make sure you find out that information.”

The Better Business Bureau has a few tips to keep in mind to avoid being scammed.

  • Along with not paying an upfront fee, also be aware of deceptive phrases like “We do the work for a fee.” If a lender is the real deal they will take a percentage once the work is complete and will most definitely NOT ask for a fee up front.
  • Do not give a third party power of attorney, and don’t sign anything that empowers the company to negotiate on your behalf. Because if you do, it gives fake companies the power to take over your loan.
  • Know your stuff. Ask lots of questions and check to see how long the company or lender has been in business. Make sure you’re up on the information — find out if the lender is well-established; are you being pressured to make a quick decision? It’s also not a good idea to give out your Social Security number or any other personal information to unfamiliar parties.

The Office of Federal Student Aid, which is part of the Department of Education, has more information on how you can avoid scammers. However, U.S. Secretary of Education Betsy DeVos is in hot water for attempting to undermine an Obama-era rule that helps defrauded students. Which means the application process has slowed to less than a crawl. Something to keep in mind while DeVos is still in office.

The videos below show just how bad the student loan crisis is and offer tips on avoiding scammers.

Featured image courtesy of USA Today