First, you receive a call about your student loans.
The person on the other end offers to lower your monthly payments or make your debt disappear altogether, potentially for a fee. Sounds great, right?
You go through the steps, sharing your federal student loan ID and other sensitive information along the way.
No worrisome notices arrive at your door because the person, using your ID, changed your billing address.
Months pass until you discover your loans have gone unpaid and slipped into default, and that you've fallen prey to one of the growing number of student loan scams.
For scammers, rising student loan debt is an opportunity. Americans are now more burdened by education loans than they are by credit card or auto debt. The average person leaves school $30,000 in the hole, while nearly 20% percent owe more than $100,000.
This new breed of fraudsters commonly promise student debt forgiveness and lower payments. They often demand upfront fees of thousands of dollars, which is illegal, for this "service." So far, these charges have cost student loan borrowers more than $95 million, according to the Federal Trade Commission. The FTC has launched "Operation Game of Loans," an effort to crack down on these companies around the country.
The FTC recently reached an $11 million settlement with a man who ran a California-based student loan debt relief scheme that preyed on borrowers hoping for reduced monthly payments or loan forgiveness. The FTC says the consumers often did not receive any debt relief and lost hundreds of dollars.
“When there’s a lot of debt, there will be people who try to take advantage of people who have that debt and are overwhelmed by it,” said Brianna McGurran, a student loan expert for personal finance website NerdWallet.
McGurran said she receives frequent texts and phone calls from companies making wild claims about student loans.
Never respond to requests to share your federal student ID, except from your servicer or the government, said Mark Kantrowitz, the publisher of SavingforCollege.com. Also, he said, be wary of any promises of "immediate" cancellation of your student debt.
"As we all know, loan forgiveness is not that quick of a process," Kantrowitz said, invoking one of the most popular — and real — programs. "Public service loan forgiveness takes 10 years."
These scammers will often offer services that you could do yourself, online, in less than half an hour.
For example, if you're struggling to meet your student loan payments, you might be able to switch into an income-driven repayment plan with your servicer. Under the program, your monthly bills will be capped at a portion of your earnings.
And loan forgiveness might truly be available to you, if, say, you work in public service or are permanently disabled, but these programs require paperwork, not payments.
If you suspect you've been tricked by one of these companies, you should contact your lender or servicer and let it know what happened. You'll want to change your username and password immediately. "You should be able to stop making payments," McGurran said.
NerdWallet also has built a database of companies promising student loan services and relief that you should be wary of. Very wary.