Guide to Spotting and Avoiding Student Loan Scams

By Kayla McCormack · October 04, 2022 · 10 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right.

Guide to Spotting and Avoiding Student Loan Scams

Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

Student loan scams are, unfortunately, not uncommon. They run the gamut — from offering student loan forgiveness scams to straight up stealing your hard-earned dollars. Since President Biden announced his plan for student loan forgiveness in August 2022, there has been an increase in student loan scams promising loan forgiveness or relying on borrower confusion around the new loan forgiveness program.

There are plenty of authentic refinancing and consolidation options, such as income-driven repayment plans, that might help you in the long run. Continue reading for more information on common student loan scams and seven red flags that can help you suss out if a company is legitimate or not.

Common Student Loan Scams

Those under stress from student loans can feel compelled to go to extreme measures to get rid of their debt, which can make them more susceptible to predatory tactics.

Promising Loan Forgiveness

One typical scam is a student loan assistance company that advertises loan forgiveness or lower payments in exchange for an upfront fee, followed by a few more payments.

Unsuspecting people pay and then six months later, the firm will shut down. This one isn’t as insidious as some other common scams, but you could still be out some money. And if you’re part of the college debt crisis and thousands of dollars in debt, that isn’t where you want to be.

Charging a Fee for Federal Student Loan Consolidation

Another common tactic is to offer federal student loan consolidation for a fee. Federal student loan consolidation is always available for free from the Department of Education. Or you could refinance your federal student loans with a reputable lender. But it is important to remember that if you refinance your student loans with a private lender, you will lose access to federal benefits such as student loan forgiveness, income-driven repayment plans, and deferment.

If you’re going to refinance your student loans, however, it’s a smart idea to do your due diligence before signing on with a lender (of course, keeping in mind that refinancing to private loans, even with reputable lenders, can strip you federal benefits like income-driven repayment plans).

7 Red Flags for Student Loan Scams

Here are a few tips to help you spot potential student loan scams.

1. Requests For Sensitive Information Over the Phone

A legitimate private lender will need your Social Security number and other info to process your refinance application, but they are unlikely to cold call you. If you’re working with an online lender, do a little homework by researching the company and reading consumer reviews.

And if you’re really unsure, you can contact your state attorney general’s office to see if complaints have been lodged against the company. The rule of thumb here? Never share any personal information until you are 100% certain you are dealing with a legitimate lender.

2. The Company Requires Direct Payment Immediately

A major indication that you’re dealing with a student loan scam is the requirement of an upfront fee. Once they get the fee, many scam companies simply take your money and disappear, leaving your loans in forbearance (or worse, default), and you none the wiser.

Debt counseling firms are not allowed to charge you any fees until after they renegotiate, settle, or reduce at least one debt for you. Yes, a reputable lender will charge interest on your loan, but they will not ask you for cash upfront.

3. A Promise of Immediate Loan Forgiveness

Student loans are notoriously difficult to shake, even if you file for bankruptcy. There are a few situations that can qualify you for federal student loan forgiveness — for example, if under the Public Service Loan Forgiveness Program (PSLF), you’ve worked for an eligible employer, are on an income-driven repayment plan, and have made 10 years of qualifying payments.

So immediate loan forgiveness is likely a ruse. While it would be nice for all your student loans to be forgiven in an instant, this is unfortunately a pie-in-the-sky dream.

If you do qualify for one of the federal loan forgiveness options, there’s no need to have a third party negotiate for you. Simply call your loan servicer for instructions on the process — free of charge. Just keep in mind that only 1% of those who have applied for PSLF have been approved.

4. You Are Encouraged to Pay Off Your Student Loans to a Third Party Directly

Why would you want someone else making payments on your behalf? It begs the question: What are they hiding?

5. The Company Claims to Be Working with the U.S. Department of Education

Some private lenders misrepresent themselves by using names, seals, and logos that give the impression they’re affiliated with the federal government’s student loan programs (hello, Obama Forgiveness Plan). However, the Department of Education does not solicit people to borrow money.

The Department of Education doesn’t work with private loan consolidation companies, but it does work with private loan servicer companies. A servicer collects payments and handles other services on the loan you already have, but it doesn’t offer private loan consolidation. The government offers its own Direct Consolidation Loan program (by application) for free, so if anyone tries to sell you this option, they are pulling one over you.

6. Someone Is Pressuring You to Sign Up under Time Constraints

No legitimate loan program is only available for a short period of time. If they are overly insistent and don’t go for an offer to call them back directly, this could be a red flag.

7. The Company Is Charging a Consolidation Fee

This is where things can get a little murky. As noted above, there are legitimate private companies that can help you consolidate and refinance student loans for a fee. As long as they don’t charge you any fees until refinancing has occurred, they’re most likely operating legitimately.

But be cautious. Again, if you want to apply to consolidate federal student loans through the Direct Consolidation program it’s a free process — so you don’t need a company to do it for you.

If you want to consolidate and refinance your private student loans on the other hand, know that the private company is probably refinancing your current loans into one new private loan. In that case, be sure to check the interest rate, any fees, and read the fine print to see if the new deal is actually better than your old one.

What to Do if You Suspect a Student Loan Scam?

If you suspect a student loan scam, do not engage. If it is a digital scam, do not click any links and report them as spam in your inbox. Do not offer any personal information via a phone call.

You can report the scam to the Consumer Financial Protection Bureau (CFPB) and to the Federal Trade Commission (FTC).

What Recourse Do You Have if You Are Victim of a Scam

If you have already fallen victim to a student loan scam, there are some important steps to take. First, contact your local police agency to report the scam. You’ll also want to report the scam to your local Attorney General’s office.

You can also report the scam, as mentioned, to both the CFPB and FTC.

What Is Student Loan Fraud?

Student loan fraud occurs when a company or individual wrongfully or deceptively over-promises or charges a fee for unachievable services. This could occur if a company offers a fee for the promise of instant loan forgiveness.

How Student Loan Fraud Works

If a company offers a borrower a path to loan forgiveness and requires a fee up-front, this could be considered student loan fraud. Scammers may ask for borrower’s personal information, like their Social Security number or access to their federal student aid account.

Scammers are resourceful and have been known to contact borrowers via phone, letters in the mail, email, or text messages. They may even impersonate reputable lenders — look for subtle changes in the logo on emails or websites. There have even been SoFi scammers, who have impersonated SoFi, offering fake giveaways to unsuspecting SoFi members.

Understand how your loan services contacts it’s borrowers — most lenders will cold call customers and ask for personal information. To protect yourself from scammers, avoid giving any personal information via phone and be sure you are interacting with a reputable agency.

Is Consolidating Your Student Loans the Right Decision for You?

Spotting a student loan scam isn’t always easy, especially when companies go out of their way to convince you they’re legit. If your gut tells you a deal is too good to be true, then it probably is.

When choosing between a Direct Consolidation Loan (for federal student loans) and student loan refinancing (for federal and/or private loans), it’s worth taking some time to learn about all your options, as the terms and potential outcomes (savings vs. interest spend) can be very different. Check out our quick guide to student loan consolidation vs. refinancing for more details.

Refinancing student loans can be a great way to make payments more manageable, depending on what kind of student debt you have. However, not all refinance options are created equal. It’s important to do your homework before deciding to consolidate and/or refinance your student loans, because your individual circumstances will dictate whether consolidation or refinancing is right for you:

Direct Consolidation Loans

Direct Consolidation Loans from the federal government can only be used to consolidate federal loans. It’s essentially a way to package multiple loans into one, giving you a new, fixed interest rate that’s a weighted average of all your federal loans (rounded to the nearest eighth of a percent) and, sometimes, a longer term. This means your monthly payment amount doesn’t necessarily go down, nor does your interest rate — it just makes things more straightforward.

Student Loan Refinancing

Refinancing means consolidating all your student loans — regardless of whether they’re federal or private. You refinance with a private lender, and typically do so if you think you might qualify for a lower interest rate. Refinancing may allow you to pay all your student loans off at a more competitive interest rate, which can save you over the life of your loan.

You can also typically change the term length on your refinanced loan — a longer term length could lower your monthly payments, while a shorter term length could help you pay off your student loans faster.

In order to know how much you could gain from refinancing, you can start by verifying how much you owe and what your interest rates are across both private and federal loans. Once you know that information, you can use this student loan refinancing calculator to see your estimated savings.

And, again, it is important to remember that if you choose to refinance your student loans with a private lender you will lose access to federal benefits such as student loan forgiveness, Direct Consolidation Loans, and income-driven repayment plans.

The Takeaway

Student loan scammers take advantage of borrowers who are trying to pay off student loan debt. These scams often appeal to borrowers looking for quick student loan relief and offer their service in exchange for a fee. To protect yourself, avoid offering personal information via requests on the phone.

If you are exploring loan options consider SoFi. SoFi is a leader in the student loan space — offering both private student loans to help pay your way through school or refinancing options to help you pay off your loans faster. See your interest rate in just a few minutes. No strings attached.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

We’ve Got You Covered

Need to pay
for school?

Learn more →

Already have
student loans?

Learn more →


How do common student loan scams work?

Common student loan scams often promise student loan relief or a quick path to loan forgiveness in exchange for an upfront fee.

Is there a way to stop student loan scam calls?

It may not be possible to stop student loan scam calls completely. If you receive unwanted phone calls, block the phone number. You can also add your phone number to the national Do Not Call list. This list prevents telemarketers from contacting you via phone, but may not prevent scammers from reaching out.

If you receive unwanted calls after signing up for the Do Not Call list, you can report them to the FTC.

What is student loan forgiveness fraud?

Student loan forgiveness fraud can occur when a company offers to assist borrowers with repayment or offers student loan forgiveness or relief in exchange for a fee. This is illegal. Most federal programs do not require a fee to access.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


TLS 1.2 Encrypted
Equal Housing Lender