The law, however, prohibits these companies from acting in unlawful, unfair, deceptive, or abusive ways, and the Department of Financial Protection and Innovation is here to help you.
Know Your Rights:
- No Fees for Federal Loan Services: Federal student loan servicers cannot charge you for applying for loan forgiveness, Income-Driven Repayment Plans, deferment, forbearance, or for filing any other paperwork. Federal student loan servicers do not charge application or processing fees to consolidate your federal loans into a Direct Consolidation Loan.
- Free Consolidation and Repayment Plans: If you have federal student loans, you should not have to pay to consolidate them or switch payment plans. The United States Department of Education offers free services for loan consolidation and repayment plans, including income-driven plans. Be aware that consolidating some loans might affect your eligibility for certain loan forgiveness programs. For more information, visit https://studentaid.gov/.
- No Payment for Repayment Information: You should never have to pay for information on repaying your student loans. Assistance is available for free through the U.S. Department of Education (https://studentaid.gov/ or 877-557-2575) or your federal loan servicer—the company to whom you make payments.
- Direct Communication with the Department of Education: For federal student loans, only the U.S. Department of Education can consolidate, forgive, or lower your loan payments. Moreover, it is always free to work directly with your loan servicer or the federal government to change your repayment terms.
- Risks of Private Loan Consolidation: If you consolidate your federal student loans into a private loan, you will become ineligible for U.S. Department of Education repayment or forgiveness plans based on your income. This includes income-driven repayment plans such as Saving on a Valuable Education (SAVE) Plan, Pay As You Earn (PAYE) Repayment Plan, Income-Based Repayment (IBR) Plan, Income-Contingent Repayment (ICR) Plan, and programs like the Public Service Loan Forgiveness program (PSLF) and Teacher Loan Forgiveness.
- Right to File a Complaint with Government Agencies: If a company violates any of your rights, you may submit a complaint to the DFPI, the California Attorney General’s Office, the Consumer Financial Protection Bureau, or the Federal Trade Commission.
How To Identify Student Loan Debt Relief Scams
The DFPI encourages consumers to exercise extreme caution before responding to any solicitation about student loan services. Below are some red flags that you might be dealing with a scam.
- Unsolicited Contact: Be cautious of unsolicited telephone calls, emails, or letters claiming that you may be eligible for student loan forgiveness. Scammers may use personal information, including your loan balance, to appear legitimate.
- Promises of quick relief: Watch out for promises of immediate or fast student loan debt forgiveness or claims that they can fix a default quickly.
- Requests for Personal Information: Never share your Federal Student Aid log-in or PIN. The U.S. Department of Education or your federal student loan servicer will never ask for this information via phone or e-mail.
- Official-Sounding Names: Scammers may use names with “federal,” “national,” or other official-sounding terms or claim affiliation with the U.S. Department of Education or other government agencies.
- Upfront Payments: Be wary of companies demanding payment upfront to apply for student loan forgiveness, often through large sums or smaller monthly payments.
- Urgency Tactics: Scammers may pressure you to act quickly, claiming you will lose the opportunity if you do not apply within a short timeframe.
- Contract and Payment Authorization: If a company requires you to sign a contract or a power of attorney to act on your behalf, and demands payment authorization, it is likely a scam.
- Disruption of Communication: If advised to stop communicating with your loan servicer or make payments to the scam company instead, do not comply. Always maintain communication with your servicer and continue making payments.
- Suspicious Contact Information: Check for e-mail addresses or websites that do not end in “.gov” or contain typos which can indicate a scam.
About DFPI
We regulate and oversee individuals and companies offering financial products and services to consumers in California under the California Consumer Financial Protection Law (CCFPL), which took effect on January 1, 2021. This includes oversight of student loan debt relief companies, as well as those providing general debt relief services, debt settlement, and credit counseling. Additionally, the Student Loan Servicing Act, the Student Borrower Bill of Rights, and the Debt Collection Licensing Act may also apply to companies interacting with consumers about student loans.
The DFPI advises consumers to exercise extreme caution before responding to any solicitation regarding student loan services. To verify whether a student loan servicer or financial service provider is licensed in California, consumers can reach out to the DFPI at [email protected] or call toll-free at (866) 275-2677.
Consumers are encouraged to submit complaints if they believe a person or company has violated state law or acted improperly regarding a consumer financial product or service. Complaints can be submitted at https://dfpi.ca.gov/submit-a-complaint/.
Links to Additional Resources
Federal Trade Commission (FTC) – Information and guidance to spot scams related to student loan debt relief.
Consumer Financial Protection Bureau (CFPB) – Consumer advisory and information about recognizing student loan scams.
U.S. Department of Education Office of Federal Student Aid – How to avoid student loan forgiveness scams and information on income-based repayment plans for student loan borrowers.
Updated as of August 29, 2024
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