Students should be careful as they look for ways to eliminate their debt. Companies promising to consolidate loans are not always what they seem to be. While there are legitimate companies out there that can truly help, be cautious not to get pulled into scams.
ORU student Samantha Bruner was promised to have her loans canceled for a short time but soon found out it wasn’t what she thought.
“I received a phone number from [a friend] of a woman who had helped her get debt-free. I called and was told she was part of FAFSA and was a loan consolidator. She said, ‘I was debt free if I paid a $600 entrance fee.’”
Bruner went on to say she later found out the representative was scamming people. According to Debt.org, the average student debt for a 2014 graduate was $33,000. The total U.S. student debt is about $1.2 trillion. Federal
Student Aid usually handles all government loans, but from time to time third-party companies take on a student’s debt.
“There are third-party companies out there that work to basically help students consolidate their loans, and they’ll tell them about the forgiveness programs,” said Mariah Michelle from the Federal Student Aid Information Center.
Loan consolidation is combining several loans into one. As a result, students will have more time to pay off loans and only one monthly payment is required. Consolidating loans can be a good option for many students, but there are some risks. More payments and increased interest rates may be a result of consolidating loans. Loan benefits that
come with the original loan may be lost as well.
If a student decides to consolidate his or her loan, he or she should be careful before giving money to a third party.
“Pretty much everything they’re [third party organizations] doing the students can do themselves.They charge them a fee for something they can actually do for free,” said Michelle.
Federal Student Aid does offer loan forgiveness but under special circumstances such as teacher’s loan forgiveness and public service forgiveness. Other reasons for loan cancellation are rare. Known scams to stay away from are companies offering to fill out the FAFSA or offering to help find financial aid.