Americans are drowning in nearly $1.5 trillion of student loan debt and where there's pain, easy fix scams are sure to follow. Some companies have come in trying to make a buck off of these struggling borrowers. Brianna McGurran is a student loan expert at NerdWallet. She is giving Jimmy Rhodes the skinny on scams targeting your Federal loans.
1. Consolidation Scams
This one offers to combine all those monthly bills into one for a fee. It sounds good, except a NerdWallet survey found that people pay too much for Federal loan consolidation. You can actually do the same thing for free on studentloans.gov. There's an online form that is not particularly complicated to fill out and you can always call customer service number for help, or your student loan servicer.
2. Loan Forgiveness Scams
This one promises immediate forgiveness or to make you payments way lower. What they're doing is signing you up for an income driven repayment plan. Which, again, is one of those things you can do for free on your own on studentloans.gov, the trusty website.
Just click on the link that says "Apply for Income-Driven Repayment" and follow the instructions. Two caveats: Because you're extending the duration of the loan, you'll pay more interest, and at the end of the twenty or twenty-five year plan, any forgiven loan amount is taxed as income, so plan ahead.
3. Red Flags for Scams
If they're really pressuring you with sales tactics to get you into one of these programs, that's something to think about, too. You know, why are they really trying to get your money so badly? If it's all just too confusing and you want help, find legitimate agencies through the National Foundation of Credit Counseling. Many are non-profits and generally charge between $50-$200.
WEB BONUS: Here's a link to the tool to protect yourself.
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