A new year comes with new scams.
Protect your money and your student loans – and watch out for those financial scammers.
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. Visit Studentloans.gov or call 1-800-557-7394.
- There are no fees for student loan consolidation.
- If the company claims to have a relationship with the US Department of Education, it’s a scam.
- Above all, student loan consolidation does not reduce your interest or your monthly payments. Rather, your monthly payment is equal to a weighted average of the interest rates on your current federal student loans.
You can also consolidate your federal loans (not private student loans) into a direct consolidation loan with the federal government. This student loan calculator tells you whether you’ll save more money with 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 says you owe “federal student tax”. If you don’t make immediate payment, the caller threatens to be arrested or prosecuted by the IRS.
There is no federal tax on student loans. It is important to note that the IRS:
- always contact you by email before calling you.
- never demand immediate payment.
- never ask for a specific payment method such as bank transfer.
- do not threaten you with arrest or deportation for not paying your taxes.
- do not request personal or financial information by e-mail.
- Hang up the phone. If you think you 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 description of the complaint. You can also call 1-877-FTC-HELP (1-877-382-4357).
- If you receive an unsolicited message online requesting immediate payment to the IRS, you can report the message to email@example.com.
Student Loan Forgiveness Scam
The scam: A student loan company – usually through an online ad or email – will cancel (for a fee) your student loans.
- No student loan company will “forgive” your student loans no matter how much you pay them.
- This is a scam similar to the Civil Service Loan Forgiveness, which is a legitimate federal government program for civil servants with federal student loans.
- If the company claims to have a relationship with the US 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 US Department of Education.
- Don’t pay an upfront fee for student loan debt relief.
- For your federal student loans, you can enroll in a free student loan repayment plan with the federal government, which may offer student loan forgiveness after 20 to 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 reduce your student loan interest rate today, the best way to reduce your student loan interest rate is to refinance your student loans.
- Unlike student loan consolidation, student loan refinancing can lower your interest rate, lower your monthly payments, and help you pay off your student loans faster.