A new year comes with new scams.
Protect your money and your student loans — and watch out for these financial tricksters.
Here’s what you need to know.
1. Student Loan Consolidation Scam
The Scam: A student loan company will promise (for a fee) to consolidate your student loans and lower your monthly payments.
- The only official form of student loan consolidation is with the federal government. Check out Studentloans.gov or call 1-800-557-7394.
- There is no fee for student loan consolidation.
- If the company claims to have a relationship with the U.S. Department of Education, it’s a scam.
- Importantly, student loan consolidation does not lower your interest or monthly payment. Rather, your monthly payment is equal to a weighted average of the interest rates on your current federal student loans.
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You can also consolidate your federal loans (not private student loans) into a Direct Consolidation Loan with the federal government. This student loan calculator shows you whether you will save more money through student loan consolidation or student loan refinancing.
2. IRS Student Tax Scam
The Scam: You receive a phone call from someone claiming to be an IRS agent who claims that you owe a “federal student tax.” If you don’t make immediate payment, the caller threatens arrest or a lawsuit from the IRS.
There is no federal student loan tax. Importantly, the IRS will:
- always contact you first by mail before calling you.
- never demand immediate payment.
- never request a specific form of payment such as a wire transfer.
- not threaten you with arrest or deportation for not paying your taxes.
- not request personal or financial information by email.
- Hang up the phone. If you think you may owe federal taxes, you can call the IRS at 1-800-829-1040 or visit the IRS website for help.
- You can report the scam to the Treasury Inspector General for Tax Administration or call 1-800-366-4484.
- You can file a complaint with the Federal Trade Commission (FTC) and add “IRS Telephone Scam” to the complaint description. You can also call 1-877-FTC-HELP (1-877-382-4357).
- If you receive an unsolicited, online message requesting immediate payment to the IRS, you can report the message to [email protected]
3. Student Loan Forgiveness Scam
The Scam: A student loan debt company – usually through an online ad or email – will (for a fee) forgive your student loans.
- No student loan debt company will “forgive” your student loans – no matter how much you pay them.
- This is a scam that sounds like Public Service Loan Forgiveness, which is a legitimate, federal government program for public servants with federal student loans.
- If the company claims to have a relationship with the U.S. Department of Education, it’s a scam. When it comes to student loans, only student loan servicers and debt collectors have a relationship with the U.S. Department of Education.
- Don’t pay an upfront fee for student loan debt relief.
- For your federal student loans, you can enroll for free in a student loan repayment plan with the federal government, which may offer student loan forgiveness after 20-25 years. You can also consolidate your federal loans (not private student loans) into a Direct Consolidation Loan with the federal government.
- You can report the scam to the Consumer Financial Protection Bureau (CFPB).
- If your goal is to lower your student loan interest rate today, the best way to lower your student loan interest rate is to refinance your student loans.
- Unlike student loan consolidation, student loan refinancing can lower your interest rate, monthly payment and help you pay off student loans faster.