Avoiding Student Loan Forgiveness Scams: Protect Yourself

Paying off student loan debt can be overwhelming and daunting and scammers know this. They prey on this anxiety, baiting consumers with fraudulent offers to defer, lower, consolidate, or eliminate debt. It is crucial to be vigilant and informed to protect yourself from these scams.

Understanding the Threat: Student Loan Assistance Scams

Through so-called student loan assistance programs, scammers offer unnecessary services and unhelpful one-size-fits-all solutions. They often charge high fees for services that federal government programs offer for free. This includes assistance with consolidating federal student loans or promises of debt elimination or reduction.

Red Flags to Watch Out For

It is important to be aware of the common red flags associated with student loan assistance scams:

Upfront Fees: If a company charges you money upfront to consolidate your federal student loans, it is a scam.
Guaranteed Debt Elimination or Reduction: If a company promises you that they can eliminate or reduce your student loan debt, use caution.
Unsolicited Offers: Be wary of unsolicited calls, messages, or letters with false claims about loan forgiveness or offers to help student borrowers for a fee.
Requests for FSA ID or Login Information: Your loan servicer will NEVER ask for your Federal Student Aid (FSA) username and password.
Pressure Tactics: Be suspicious of high-pressure sales tactics, such as, “If you don’t pay now, you’ll miss this opportunity.”
Requests for Personal Information: Never give out personal information, such as a credit card or bank account number, to a business or organization you haven’t researched online. You could be putting yourself at risk of identity theft.
Ads Promoting Debt Relief: Be cautious of ads (radio, podcast, social media) offering “debt relief.”
Official-Looking Seals: Just because correspondence has an official-looking seal does not make the program legitimate.

How Scammers Operate

Unscrupulous scammers may change your contact information on file with your lender to their own, so that their business, rather than you, receives all loan correspondence. This prevents you from staying informed about your loan status and any legitimate relief options.

Real-Life Examples of Student Loan Scams

The Federal Trade Commission (FTC) has taken action against individuals and companies involved in student loan debt-relief scams. For example, Eric Caldwell and David Hernandez will be permanently banned from the debt relief industry and required to turn over their assets to resolve Federal Trade Commission charges that they helped operate an illegal student loan debt-relief operation. In its early 2025 amended complaint, the FTC alleged that Nevada-based Superior Servicing, along with several other companies, and their operators, Caldwell, Hernandez, and Dennise Merdjanian, pretended to be affiliated with the Department of Education or its loan servicers to convince student loan borrowers about the legitimacy of their student loan debt-relief program. They required borrowers pay upfront fees that they claimed would be applied to consumers’ student loan balances, when, in reality, they were pocketing consumers’ hard-earned money.

Read also: Navigating Loan Scams

Individual defendants Caldwell and Hernandez have agreed to settle the FTC’s charges in proposed orders banning them from engaging in the debt relief industry. Additionally, Caldwell’s proposed order bans him from engaging in telemarketing, and Hernandez’s proposed order prohibits him from violating the Telemarketing Sales Rule. Furthermore, the proposed orders prohibit both of them from:

Falsely claiming to be affiliated with any person, corporation, or government entity;
Charging consumers illegal upfront fees;
Making any misrepresentations about other products or services; and
Using false statements to collect consumers’ financial information.

The proposed orders impose a monetary judgment of more than $45.9 million that will be partially suspended, due to the defendants’ inability to pay, after they pay more than $1.6 million and turn over approximately $560,000 in personal and business assets. If either defendant is found to have materially misrepresented their finances, the full amount of the monetary judgment would become immediately due.

Litigation continues against Merdjanian and the corporate defendants.

Protecting Yourself from Scams

Here are some key steps you can take to protect yourself from student loan forgiveness scams:

Be Skeptical: Approach any offer of student loan assistance with skepticism, especially if it seems too good to be true.
Do Your Research: Research any company offering student loan assistance before providing them with any personal information or paying any fees. Check their reputation with the Better Business Bureau and the FTC.
Contact Your Loan Servicer Directly: The best way to get accurate information about your student loan repayment options is to contact your loan servicer directly.
Utilize Free Resources: Take advantage of free resources offered by the Department of Education, non-profit organizations, and your state's student loan agency.
Don't Pay for Free Services: Remember, you never have to pay for help with your student loans. Submitting documents and applying for federal and state programs that help student borrowers with the loan forgiveness process is free.
Keep Your Contact Information Updated: Make sure you are still receiving loan correspondence.
Create an Account with Summer: Sign up for a free online account with Summer, which can help student borrowers understand and navigate loan repayment options.
Report Suspicious Activity: If you suspect you have been targeted by a student loan scam, report it to the FTC at ftc.gov/StudentLoans.

FAFSA Scams on the Rise

Scammers aren’t just targeting borrowers anymore, they’re also finding ways to exploit the Free Application for Federal Student Aid (FAFSA) and other financial aid systems. As more students and families complete the FAFSA each year, the opportunity for fraud has grown. The US Department of Education has found that taxpayers have unknowingly paid more than $90 million to ineligible student aid recipients.

The US Department of Education is rolling out new security measures to protect students and families applying for financial aid. Starting this fall, every FAFSA applicant will go through a permanent identity screening process to help stop identity theft before aid is disbursed. First-time applicants may be asked to verify their identity by showing a valid photo ID in person or over live video to a school official.

The US Department of Education, Federal Student Aid, your college's financial aid office, and state-backed organizations are the only ones who will send you legitimate communications regarding financial aid, your FAFSA, or studentaid.gov account. Department of Education.

Resources for Student Loan Borrowers

Federal Trade Commission (FTC): ftc.gov/StudentLoans
The City of New York: Visit nyc.gov/studentloans to learn more.
VSAC’s financial aid counselors: VSAC’s financial aid counselors work with more than 43,000 borrowers yearly to provide free counseling on student loans and repayment.

VSAC's Advice on Avoiding Scams

As the potential for student loan scams increases over the coming weeks and months, VSAC’s loan counselors want students and their families to watch out for these ten red flags from student loan scammers who:

Ask you to pay upfront, or monthly fees, for access to help.
Use pressure tactics, such as, “If you don’t pay now, you’ll miss this opportunity.”
Promote ads (radio, podcast, social media) offering “debt relief.”
Ask for a credit card or bank account number.
Ask for your Federal Student Aid (FSA) ID or login information.

Even if you don’t have a student loan with VSAC, you can reach out to us for free assistance or answers to any questions. Our financial aid experts can walk you through loan terms, advise you on repayment plans, and offer resources to make you an informed buyer who can spot a student loan scam instantly.

What to Do If You've Been Scammed

If you have already been scammed or have questions, contact Marine Bank and one of their banking professionals will be happy to assist you.

Read also: Guide to UC Davis Student Housing

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