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HomeBlog Student LoansHow To Avoid The New Student Debt Relief Scams
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How To Avoid The New Student Debt Relief Scams

August 21, 2014 by National Debt Relief

appearingDid you graduate a few years ago owing $20,000, $30,000 or even more on your student loans? That can be a pretty big burden when you’re just starting out in your career and are a low earner. Or worse yet, maybe you haven’t been able to find a job in your field of study and have become one of those “underemployed” – a fancy way of saying you’ve had to settle for working as a barista at Starbucks or as a call center employee. But then, Eureka! You receive a call from a friendly-sounding fellow who says that no sweat, he can get you out from under that load of student debt. He may even say he can get you a debt consolidation loan that will lighten your load and at zero interest. Would that sound like a great deal or what?

Watch out for predators

Former Presidential advisor Rahm Emanuel once said, “never let a crisis go to waste.” This could be the slogan of the scam artists that have picked up on the student debt crisis and are not letting it go to waste. These scamsters had seen that many young people are feeling desperate and confused about their student loans and have created new student debt relief scams you could fall for if not careful.

The scams

There are two very popular scams. The first is debt relief firms that make big promises of what they can do to restructure your loans so long as you are willing to pay their upfront fees. Some of these fees are so steep they would be equal to a very high interest rate if they were applied, say, to a $10,000 student loan. These companies often want you to turn over your personal information including your passwords, Social Security numbers and the personal identification (PIN) numbers of your student loan accounts.

The second type of scam is the loan consolidation scam. This is where they promise to get you a federal debt consolidation loan if, again, you agree to their fees. One of the easiest ways to spot this scam is if they ask you to provide a power of attorney. It‘s just not routine to have to provide a power of attorney to get a loan. As a matter of fact there’s never a reason to do this unless there is a clear need for it such as dementia or Alzheimer’s. The reason why a shady debt relief agency wants your power of attorney is so that it can apply for a federal consolidation loan for you. They’ll ask for all of the information that you would have to input into the website of FedLoan Servicing and then complete the application for you acting as if it were the borrower. But there is only one way to consolidate loans with a Direct Federal Consolidation loan. This is via the online consolidation application available on the US Department of education’ s website. (loanconsolidation.ed.gov). And completing this application is very simple and something you could certainly do yourself for free.

Second, a scam artist may try to get you to believe you that you can’t consolidate your loans yourself. In truth the Fedloan Servicing application is pretty straightforward. And Fedloan Servicing improved it recently to make applying for the loan even easier. It will take you just 30 minutes or less. If you have any questions about the application process you can always call Fedloan Servicing directly and get help.

A “unique” service

A second sign that you are probably speaking to a scam artist is if he offers you the “unique service” of a year of no payments after you consolidate with the new loan. The fact is that there is nothing exclusive about this at all. All the scam artist is doing is putting your loans into forbearance. Again this is something you can do yourself online free at the Fedloan Servicing website.

Third, you may be talking to a scamster if he offers only loan consolidation. He will push this as the only solution regardless of what student debt issue you have. In doing so, he neglects to tell you there are options besides consolidating. In fact, there are a number of different repayment programs available to you even if you’re a bit past due on your payments.

He’s very pushy

Shady debt relief agencies also tend to be very pushy and use sales tactics. They will try to rush you into consolidating your loans and might even have a “special offer” to get you to make a fast financial decision. It’s important to keep reminding yourself that what they are most concerned about is their financial bottom line and not your best interests.

Lying salesman or businessmanMost of these agencies will also be less than honest or ambiguous about what they charge. They will try to finesse the issue by telling you that their fees vary based on the amount of work involved and how much debt you have. They may also claim you will need to pay monthly fees in addition to an upfront lump sum payment– all just to consolidate your debts. If the so-called debt relief agency is ambiguous or less than honest about its fees, this is a huge warning sign regarding its lack of ethics.

Finally, many of these agencies will have a website they hide behind. You will not see pictures of their representatives or find direct phone numbers you could use to contact them. They don’t want to form a personal relationship with you. Their goal is to preserve their anonymity so that if you run into trouble or change you mind you can’t contact them.

What you could do yourself

As you have read if your goal is to consolidate your loans with a Direct Federal loan this is a fairly simple process you can do yourself. You can also restructure your debt yourself by changing to a different repayment program. To do this you will need to first go to the federal student loan database (https://www.nslds.ed.gov/) to get information about your loans such as their type, when the funds were disbursed, what you’ve paid so far and how much you still owe. You should save this information to your student debt portfolio for future reference.

With this information in hand you will need to next check out the federal loan repayment (https://studentaid.ed.gov/repay-loans#repayment-plans) programs to determine which ones you would qualify for and would give you the best terms and lowest monthly payments. One the most popular of these is Pay As You Earn. You might have read about this program recently when Pres. Obama signed an executive order making about 1.4 million more people eligible. If you are one of these people you could see your monthly payments capped at 10% of your disposable income.

If you find you’re ineligible for Pay As You Earn there is another program called Graduated Repayment. If you are currently a low earner but know that your income will increase in the years ahead this can be a very good option. It allows you to start with low payments that gradually increase every two years.

There is also a program called Income-based Repayment where your monthly payments would be capped at 15% of your disposable income – again if you would be eligible.

The last step

If you are able to find a better repayment program than what you currently have, the final step in the process is to contact your lender and discuss this with it. Your representative should be happy to help you through the process of changing repayment programs and might even suggest a better option than the one you chose.

Best of all, none of this will cost you a single cent let alone a big upfront payment or monthly fees.

Do you qualify for debt consolidation?

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National Debt Relief is one of the largest and best-rated debt settlement companies in the country. In addition to providing excellent, 5-star services to our clients, we also focus on educating consumers across America on how to best manage their money. Our posts cover topics around personal finance, saving tips, and much more. We’ve served thousands of clients, settled over $1 billion in consumer debt, and our services have been featured on sites like NerdWallet, Mashable, HuffPost, and Glamour.

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By clicking "Get Free Quote", you agree that the phone number you are providing may be used to contact you by National Debt Relief (including autodialed and prerecorded calls, as well as text/SMS messages). Msg. and data rates apply, and your consent to such contact is not required for purchase.
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Easy National Debt Relief Caller: April Transcribed WE 1/17/2021 April: Our call may get recorded. What financial concerns had led you to seek out National Debt Relief's services? RILEY: I guess just not being able to pay my debt. April: What had you choose National Debt Relief over other companies that provide the same service? RILEY: Really just researching online. Everything that I had read about them seemed pretty positive. April: What service or program did National Debt Relief help you to get through? Like a payment or consolidation program, anything like that? RILEY: I just do bi-monthly payment to them, and then they reach out to my debt account, I guess, that negotiated everything for me. So, it’s pretty easy. April: Can you walk me through the process of what you went through to enroll for the services? RILEY: God, it's been like two years, so I kinda don't really remember. I just had to fill out some stuff online and then talk to them on the phone. I had to give them all my account information and everything. And then they worked out a payment plan for me. And they communicate with me like once a month with my statement. And whenever they have communication with my accounts, they have called me and had me verify before they've done anything and whatnot. April: That sounds like a really good service there. RILEY: Yeah. April: At this point, are you still in the program or have you completed it at this point? RILEY: I'm almost done. It was, I think, a two-year plan. So, yeah, I think I just have one other account that I'm paying on. April: How about any interactions with the negotiators? You said they will call you at any time that there was maybe an account activity that they want to confirm with you first. RILEY: Uh-huh [yes]. April: So, how is the interaction with them when they reach out to you and you're able to discuss with them? How is that interaction? RILEY: It's been super easy and positive for me and relieves a lot of stress and anxiety. So, yeah, it’s been very easy. April: And then how has National Debt Relief been able to work with you in terms of your payment plan? RILEY: I basically just told them what I could afford, and they figured it out. And they have offered COVID relief if I need to stop payment for the time being or whatever. Fortunately, I haven't had to do that. So, I don't really know how that would have worked, but that was an option. But they're always like, “Call us if you can't make payment, and we'll figure something out for you.” April: What are your thoughts about the cost in relation to the quality of the service you received? RILEY: I'm really happy with the program. [unclear 0:04:22] as far as I know. I don't have any complaints. April: Has working with National Debt Relief impacted your life? RILEY: Yeah. April: How would you say that it's impacted your life at this point? RILEY: It just has relieved a ton of pressure and stress, financial stress, anxiety. I'm not living paycheck to paycheck now to pay my interest, so that’s been nice. April: Have you had other experiences to National Debt Relief that perhaps you want to share with us in regards to your experience with them? RILEY: No. I think that’s it. April: On a scale of 1 to 5, where would you rate National Debt Relief, if 5 stars is that you recommend to your friends and 1 star is you're very dissatisfied? RILEY: I would say 5. April: In a few words, how would you summarize overall the National Debt Relief in your experience with them? RILEY: Just easy and stress-free. April: Would it be okay for us to also utilize your commentary as a review that we can publish for National Debt Relief? And that would go to public webpage here, but that's to help other consumers make good choices if they're also in the same market. RILEY: I guess. Would it have my first and last name? I don’t— April: Only the first name. And if that's an issue, we do the first letter. RILEY: [unclear 0:06:03] you want my full name. April: Not at all. So, we only do the first name as an option. We can also do the first letter. So, it's really up to you on which option you prefer. But just the first name. We don't do last name. We don't post anything personal like your phone number. RILEY: Yeah. I think you can use my first name. April: I do offer a link that we can also send you with a direct link to your review. So, once it's published, you also get to see directly. Is that something you would like to have sent to your email? RILEY: No.

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