Submitted by New Jersey Bankruptcy Lawyer, Lee M. Perlman.
A Siberian tiger carries a piece of meat in The Highland Wildlife Park in Scotland.
If you’ve got student loans, chances are you’ve seen an email or Facebook ad that says something like this: “Call now to qualify for President Obama’s Student Loan Forgiveness program.”
Sounds official, but that voice in the back of your head saying you should probably be wary is right. Many scam artists prey on stressed-out borrowers who are struggling to pay student loans – put your trust in the wrong place, and you’ll end up worse off than you started. Here are some tips on how to get the help you need, without being misled or defrauded.
Know what’s legit.
You can tell right off the bat that a firm is dubious if it insists on charging you a fee in advance to negotiate a lower interest rate with your lender. Debt counseling firms are not allowed to charge you any fees until they renegotiate, settle or reduce at least one debt for you. In another spin on this scam, such firms may offer to help you negotiate cancellation of your student loans. Avoid them, because student loans generally can’t be discharged, except in a few situations.
Watch out for fake-outs.
The Federal Trade Commission (FTC) has found that some private lenders try to misrepresent themselves by using names, seals and logos that give the impression they are affiliated with the federal government’s student loan programs. However, the Department of Education does not send out solicitations to encourage anyone to borrow money.
Some deceptive lenders will also give away free gift cards, credit cards and sweepstakes prizes to tempt borrowers to work with them. That can also be a sign of a scammy lender, according to the FTC.
Do your homework.
If you have any concerns, check out the company with your state attorney general’s office to make sure it isn’t subject to consumer complaints, the FTC advises. Don’t share your social security number, personal identification number or any other personal information—online, on the phone or elsewhere—until you are 100% certain you are dealing with a legitimate lender.
Know your consolidation options.
Dubious lenders aren’t your only alternative to juggling multiple loans. You can consolidate eligible federal student loans into a single Direct Consolidation Loan for no fee through the government. This option may work well if you want to make just one monthly payment. Direct Loan Consolidation may also lower your monthly payment by allowing you to extend the number of years you have to pay back your debt. But beware – by stretching out your payments over a longer period, you usually end up paying more in interest overall. And you may lose some benefits, such as interest rate discounts, principal rebates and certain loan cancellation benefits.
Check out refinancing.
Many borrowers mistakenly believe they can’t consolidate federal and private loans into a single loan. You can’t do so through federal Direct Loan Consolidation, but you can through some legitimate private lenders. These lenders allow you to apply for a new loan and use it to pay off your original loans—but at a new and potentially lower interest rate.
Just as with consolidation through the federal government, you’ll want to consider the benefits you’re forfeiting by transferring federal student loans to a private lender. For example, you’ll lose access to the Public Service and Teacher Loan Forgiveness Programs, deferment and forbearance (although some private lenders do offer the latter) and graduated, extended and income-driven repayment plans (such as Income-Based Repayment and Pay As You Earn). If you think you’ll need any of these things, you should think twice about refinancing federal student loans.
But if you have high interest rate loans and your priority is saving money, refinancing can be a great way to do so.
As you can see, there’s no one-size-fits-all solution for managing student loan debt, so you’ll want to do your homework and consider your own personal situation before making any decisions. Most importantly, knowing the signs of a less-than-legit student loan program will help you avoid putting your trust – and your debt – in the wrong hands.
Read the original article on SoFi. Looking for a better loan experience? SoFi is the second largest marketplace lender providing student loan refinancing, mortgages and personal loans. You can also check out SoFi on Facebook, LinkedIn and Instagram. Copyright 2015. Follow SoFi on Twitter.