Beware of “loan rescue,” new college graduates told
With federal student loans about to come due for many 2018 college graduates, Iowa College Aid and the Iowa Attorney General’s Office are warning students to beware of “loan rescue” organizations. Such organizations promise help arranging federal student loan forgiveness or other loan benefits in exchange for an up-front fee, with many companies also charging an ongoing, monthly “maintenance fee.”
“These companies can’t do anything for you that your federal student loan servicer can’t do—for free,” said Carolyn Small, postsecondary registration administrator for Iowa College Aid. “‘Rescue’ companies often go by names that imply they are government agencies or nonprofit organizations, and one even tried using the U.S. Department of Education logo.”
Iowa Attorney General Tom Miller adds, “Other ‘rescue’ companies are criminal operations looking to steal identities and money.”
Borrowers seeking to lower their monthly payments, postpone repayment or apply for loan forgiveness should contact their federal student loan servicer directly. (The name and contact information for a borrower’s loan servicer can be found through the National Student Loan Data System, NSLDS.ed.gov.)
Reliable information regarding loan forgiveness, repayment plans and deferment and forbearance can be found on the U.S. Department of Education’s Federal Student Aid website, StudentAid.gov. Iowa also offers loan forgiveness programs, which are outlined on the Iowa College Aid website, IowaCollegeAid.gov. Small cautioned against finding loan forgiveness programs through a search engine, which can yield paid results for companies not affiliated with federal loan servicers.
When contacted about student loan assistance, here are some warning signs student loan borrowers should watch for:
• Direct solicitations via postal mail, e-mail, text, or phone
• Requests for payment in advance
• Guarantees of loan forgiveness, especially immediate forgiveness
Small offered a further warning to borrowers: “Under no circumstances should you give a loan rescue company your Federal Student Aid ID (FSAID) or allow them to create one on your behalf. They may execute transactions on your student loan that you do not know about and may not want.” She related the case of a borrower who was told her loans had been forgiven, when a loan rescue company had actually used her electronic signature to place her loans in forbearance. Alternatively, some companies might seek to have borrowers execute a Power of Attorney that gives the company permission to complete financial transactions on behalf of the borrower. Borrowers should avoid these agreements.
The agencies’ advice is timely because the grace period for most student loans ends six months after a student leaves college. That means May 2018 graduates should work with their federal student loan servicers now to choose repayment plans in preparation for starting repayment in November.
More information about student loan forgiveness and repayment is available through free publications from Iowa College Aid, IowaCollegeAid.gov. More information about student loan “rescue” scams can be found on the Iowa Attorney General’s website at bit.ly/2NouAop.
If you think you’ve been victimized by a student loan rescue scam, file a complaint with the Iowa Attorney General’s Consumer Protection Division.