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Guide to Federal Student Debt Relief Scams

Written by: Kristy Welsh

Last Updated: July 16, 2017

Scammers know student loan borrowers are drowning in debt and desperate for help. These crooks take advantage of that fact by advertising promises they cannot guarantee and charging illegal upfront fees. They target federal student loans, specifically, because there really are government programs in place that help borrowers who are struggling. Getting set up on one of these programs is free, and something anyone can do, but scammers exploit ignorance and charge borrowers hundreds of dollars for it.

Unfortunately, what many borrowers don’t know is that there is nothing a student debt relief company can do that borrowers cannot do for themselves. Or, they think the scammers they’re dealing with are associated with the U.S. Department of Education or some other government agency.

Best case scenario, scammers charge illegal upfront fees and actually do the work they promise, getting the borrower into a legitimate student debt relief program through the federal government.

Worst case scenario, scammers charge illegal upfront fees and never follow through on anything.

What are the warning signs of a federal student debt relief scam?

Again, there is nothing a student debt relief company can do for you that you cannot do for yourself. However, if you do find yourself dealing with anyone other than your federal student loan servicer, here are the red flags to watch out for:

  • Collecting upfront fees before providing a service
  • Pressuring you to provide credit card information
  • Pressuring you to sign a contract immediately
  • Promising they can get your student loans forgiven, cancelled, or discharged
  • Promising that debt relief will be immediate
  • Advertising promises online or on the radio
  • Using official sounding names and/or URLs that suggest affiliation with the Department of Education or other government agency
  • Claiming to have special connections or relationships with the Department of Education or other government agency
  • Asking to change the contact information with your lender from your information to theirs
  • Asking for third-party authorization, power of attorney, or your Federal Student Aid PIN, any one of which could allow the company to make decisions about your loan on your behalf
  • Asking you to cease contact with your student loan servicer and to make your monthly payments to the debt relief company instead

What are some examples of student debt relief scams?

Student Loan Processing.US allegedly suggested association with the Department of Education and charged illegal upfront “enrollment” fees totaling 1 percent of the borrower’s student loan debt.

Consumer Assistance Project allegedly charged upfront fees of $250, as well as subsequent monthly fees of $303 for up to 3 years, and delivered on nothing.

Student Aid Center allegedly told consumers they had been approved or pre-approved for a loan for a lower monthly payments, but they had to pay upfront fees of $199 a month for up to 5 months in order for consumers to receive lower monthly payments. They also told consumers to cease all contact with their lenders and make their monthly payments through Student Aid Center instead.

Are any federal student debt relief companies legitimate?

If they’re not breaking the law, they’re legitimate (see signs of a scam above). But that doesn’t mean you should do business with them.

Granted, there is nothing illegal about a company charging you for a service that is free somewhere else. But why pay for something that doesn’t have to cost you a thing? What’s worse is, you may think you’re dealing with a legitimate company only to find out later that they didn’t follow through as promised, meanwhile you’re out hundreds, if not thousands of dollars.

What do I do if I think I have been scammed by a student debt relief company?

Submit a complaint to the CFPB immediately. You should also contact your student loan servicer and let them know you do not want anyone else authorized to make decisions about your loan on your behalf.

How do I get free federal student debt relief?

All of your options are laid out for you at, including:

Direct consolidation loans

If you have multiple federal student loans, you can consolidate them into one loan payment.

Income-driven repayment plans

If you’re struggling with the standard 10-year repayment plan, one of the federal government’s income-driven repayment plans could help lower your monthly payments, as they’re based on a percentage of your income.


Public Service Loan Forgiveness. You may eligible to have your student loan forgiven if you work at least 30 hours per week in public service for 10 years. Prior to forgiveness, though, you must make at least 120 consecutive monthly payments under one of the income-driven repayment plans.

Teacher Loan Forgiveness. You may qualify for this if you teach full-time in a low-income school.

Income-driven repayment plan forgiveness. If you are on one of these plans, and you’re not done paying it off after 20 to 25 years, you may qualify for forgiveness of the remaining balance.


There are all sorts of scenarios in which you could have your student loan discharged, including:

  • Closed School Discharge
  • False Certification of Student Eligibility or Unauthorized Payment Discharge
  • Unpaid Refund Discharge
  • Total and Permanent Disability Discharge
  • Discharge in Bankruptcy
  • Death Discharge
  • Borrower Defense Discharge
  • Perkins Loan Cancellation and Discharge

Deferment or forbearance

Neither of these options will eliminate your student loan debt. However, they will postpone your payments so you can try and get back on track. Note, these should always be a last resort, as you’re not only postponing the inevitable but, in some cases, racking up interest fees in the meantime.

What if my student loan servicer isn’t helpful?

Contact the Federal Student Aid Ombudsman Group. If that’s not helpful, you can file a complaint about your student loan servicer with the Consumer Financial Protection Bureau (CFPB).