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Ask 4 Questions to Avoid Being Duped By a Student Loan Service

By U.S. News & World Report

The Student Loan Ranger has discussed before the so-called “debt relief” companies that target student loan borrowers. Due to the volume of questions we’ve been receiving on this topic, however, we thought it might be worth revisiting.

What most of these emails have in common is the subject line, which usually reads, “Is this a scam?” While we can’t opine on individual companies, we can try to give you some key questions to ask to try and evaluate these organizations yourself.

1. What is the fee? Let’s be clear — just because an organization charges a fee to assist borrowers with their student loans doesn’t make them a scam. It’s how transparent the fees are and how clearly they explain what you will get for that fee that’s important.

The Student Loan Ranger has seen too many borrowers who thought they were making payments to their loan every month of, say, $39, only to find out that the company they had worked with simply put the loan in forbearance, meaning no payments were due at all.

The $39 was a “monthly fee” to keep the loan in forbearance. In reality, eligible borrowers can obtain forbearance for free from their federal loan holder, often with a phone call, for up to 12 months at a time and no fee is charged.

Learn [when to request a student loan forbearance.]

Others have paid $600-$2,500 to “get their loans out of default and on a zero-dollar payment plan,” only to have the company facilitate a federal consolidation with another forbearance — options the borrowers could have done themselves with maybe two phone calls and an online application, for free.

The borrowers haven’t been put on a payment plan at all, but given a temporary postponement, which will actually likely increase the balance.

Get tips on [deciding to postpone student loan payments.]

2. What will they be doing for that fee exactly? The bottom line is that many of these services, transparent or not, are charging for “document processing” services. You can usually find language to that effect in the fine print at the bottom of the Web page or agreement.

If you want to pay someone to fill out an application for you, that’s your prerogative. Just make sure you know exactly what is being promised for that fee you’re paying, and that the fee is reasonable for the work being performed.

3. Can they get you the “Obama Student Loan Forgiveness?” OK, this one’s a trick question. There is no such thing as the Obama Student Loan Forgiveness Program, but this phrase seems to pop up in every ad we’ve seen for not-so-transparent companies. So if they tell you yes, they absolutely can get you that program, it might be time to move along.

Any legitimate student loan counselor will be quick to explain that such a program does not exist, but be able to explain in detail the eligibility requirements for those programs, such as Public Service Loan Forgiveness and income-based repayment, that do exist.

Understand the details of [the president’s student loan forgiveness proposal.]

4. Are they asking for your National Student Loan Data System PIN or FSA ID? This one is a bit backward as it’s a question they’d ask you, not the other way around — but it’s still a big warning sign that this organization may not have your best interests at heart.

The U.S. Department of Education takes privacy and information security very seriously and has made it clear that only certain entities are allowed access to student loan information. If the organization you are working with needs your full loan info, they will teach you how to access it yourself rather than risking violation and asking for the PIN, password or FSA ID.

A similar red flag is when they request you fill out a power of attorney to give them permission to act on your behalf with your loan servicer. While it is expected that they may need written permission to allow your loan holder to speak with them about your student loans, some entities are using these power of attorney forms to change the address on the borrower’s account to their own, ensuring the borrower is kept in the dark as to their loan status.

Never allow an organization to do this. If the loan should go past due or default, you would still be the one to suffer the consequences, even if someone else was “managing” your account.

The Student Loan Ranger has said it before: There’s not a person or entity on the planet that can get a borrower access to a federal benefit or lowered payment on their federal loan that they can’t get for themselves, for free, directly from their loan holder. There are also plenty of free services available to student loan borrowers who have questions or may be struggling.

And remember: If something sounds too good to be true, it probably is.

More from U.S. News

What Borrowers Can Expect From the New Income-Driven Repayment Plan

Get Ready for Upcoming Federal Student Aid PIN Changes

4 Things to Think About When Refinancing Student Loans

Ask 4 Questions to Avoid Being Duped By a Student Loan Service originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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