Much attention is being paid to the recent federal and state crackdown on debt relief companies claiming to help you pay off or eliminate student loan debt for just a few hundred dollars.
Whether the government is here to help or not, here are four steps you can take to prevent yourself from falling for scams or picking a repayment plan that costs you thousands:
Research your repayment plan options with the federal government
Choosing the wrong repayment plan with the federal government can cost you thousands for a number of reasons. If you work in public service for the federal government or in the private sector, you may get the remaining balance of your federal student loans forgiven after 10 years of on-time payments. The first batch of people who signed up for public service loan forgiveness in 2007 and completed all required terms will experience forgiveness on their remaining student balances this month. The range of forgiveness can be anywhere from a few dollars to over one hundred thousand dollars.
The catch? You only get the remaining balance forgiven if your loans are from direct lending or you reconsolidated your federal student loans to direct loans. Your payments could even be as low as zero if you can't afford them, yet they count towards the 10 years. What's lost could be thousands to tens of thousands.
A direct loan or directly lent loan comes straight from the federal government. Seems like this would be any federal loan, but it isn't. A program called Federal Family Education Loans (FFEL) ended in mid 2010. These loans were federal government backed education loans issued by private lenders such as Wells Fargo.
If you happen to have a FFEL and are interested in a program such as Public Service Loan Forgiveness, you should contact the Loan Consolidation Information Call Center at 1-800-557-7392. You can then exchange all your current loans for one that is directly lended.
Stick to reputable sites and lenders if refinancing
Don't believe anyone that they can get rid of your student loan debt completely — no matter who it is. Federal and private student loans are rarely able to be discharged through bankruptcy. Unless you are in a situation where you may never work again, this kind of service is unlikely.
The good news is if you think you can qualify, the information is readily available on studentloans.gov or 800-4FEDAID.
If you just want your payment lowered and have excellent credit, you can look to reputable lenders such as SoFi, CommonBond and the comparison site credible.com. These sites contain private lenders that may help you drop rates on your student loans to as low as 4%.
Double check names you searched for with the phone number
One of the main tricks that actual scammers use is acquiring websites close to the name of your lender when you search for them. Never call a number that is not on the site you were directly given by your lender through email on your billing statement.
Helpful hint: Your lender would never give you an offer to pay $200 to $400 to discharge your debt. (See also: After the Equifax Breach, Watch Out for Phishing Scams)
Know who to go to for help—for free
Offers where the lender is charging several hundred dollars to help you choose a repayment plan are ridiculous because not only can you call your servicer, but you can also call the federal student loan ombudsman or the Consumer Financial Protection Bureau when you need help.
Don't fall for debt relief scams. Do research all the legitimate options that are available to reduce your debt or get lower monthly payments.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on November 8, 2017, and has been updated.