Student loan fraud happens when criminals falsify information to obtain financial aid or steal money and personal data from borrowers.
The rise of AI-driven phishing emails and other sophisticated technology has made it harder to spot scams in recent years.
If you get caught up in a student loan scam, you could suffer financial loss and damage to your credit score, and even lose eligibility for financial aid.
Let’s dive into what student loan fraud is, common types of scams, and what you can do to protect yourself.
What Is Student Loan Fraud?
Student loan fraud is a type of crime that targets student loan lenders, the government, or borrowers.
There are many valuable targets for scammers: student loan checks, the borrower’s money, and personally identifiable information (PII) that can be used to commit identity theft.
Common Types of Student Loan Fraud
There are many different types of student loan fraud. Here are some common scams that borrowers need to watch out for:
FAFSA Fraud
Criminals may falsify information, including someone’s identity, assets, or income, on the Free Application for Federal Student Aid (FAFSA) to obtain student loans.
They may also use the stolen identities of real people to create “ghost students” and claim student aid for themselves.
Debt Relief and Forgiveness Scams
Scammers may claim to work for a company that can eliminate or reduce your student loan debt and charge a fee and/or ask for your PII to get the process started.
In reality, the scammer has no intention of helping you with your student loans.
While there are some scenarios where debt can be eliminated or reduced – such as the Public Service Loan Forgiveness (PSLF) program – these programs are available for free through the U.S. Department of Education (DOE).
Imposter/Phishing Scam
When a criminal pretends to be someone else to gain your trust and trick you into spending money or sharing PII, it’s an imposter or phishing scam.
These types of scams can take many forms:
- Someone claims to be from the Department of Education, IRS, your university, or your lender, requesting money or personal information
- Someone claims to be a school official warning you about a late tuition payment
- Someone claims to be from a debt relief company that can get your loans forgiven
There are many ways for scammers to reach out to potential victims:
- You might receive a high-pressure phone call demanding payment or PII.
- You might receive an email that appears to be from a legitimate organization.
- You might even get contacted via text message or social media. No matter the method, the goal is to get you to take some action that benefits the scammer.
Debt Collection Scams
Dishonest companies or scammers may contact you claiming to be from a collection agency and demand payment on your student loan debt.
They may provide some details about your debt to confuse you and use high-pressure tactics to get you to pay immediately. They may also want access to your Social Security number (SSN) or FSA ID to commit fraud.
How to Spot Student Loan Fraud
Luckily, there are some ways to spot student loan fraud:
- Requests for money or personal information. Generally, government agencies, lenders, and schools will not contact you directly to demand immediate payments or PII. If you ever do need to make a loan payment, you should do so via official channels, such as your loan account. Don’t click any links or download any attachments included in emails.
- Red flags in emails. If you receive an email from a lender, the Department of Education, or your school asking you to take some action, don’t immediately comply. Look for signs of fraud, like unusual domains in the sender email address, or website links that don’t look right. To verify a request, open up your browser and navigate directly to the organization’s official website to get the right contact information.
- Pressure tactics. If you get a call, email, or text from someone saying you need to take action now – such as a warning of an overdue payment or a message that your student loan account has been hacked – take a minute to think before you do anything. Again, reach out to the organization directly via official channels to verify the request.
- Sky-high promises. Anyone offering you guaranteed student loan forgiveness, drastic debt relief, or any other big promises that sound too good to be true, might be running a scam.
- Requests for upfront payment. Anyone asking for advance payment – such as a one-time fee for getting you debt relief – is likely running a scam. Avoid any individual or organization that wants to take your money up front for a student loan-related service.
What to Do If You Encounter a Scam (and How to Report Student Loan Fraud)
When you come across a student loan scam, there are things you can do to report the scammer and recover your identity.
- Report fraud, waste, abuse, or mismanagement that violates the laws surrounding the U.S. Department of Education (DOE) funds or programs to the U.S. DOE Office of the Inspector General.
- Report scams and identity theft to the Federal Trade Commission at ReportFraud.ftc.gov. This is important if you have fallen victim to a scam, because you can use FTC documentation to help show you were a victim and recover your identity.
- Freeze your credit reports to prevent criminals from opening fraudulent accounts in your name. If you ever need to submit a legitimate application for credit, you can temporarily unfreeze your reports before locking them back down.
- Monitor your bank account, retirement account, credit cards, Social Security account, and more. Look for transactions, withdrawals, and charges you don’t recognize, and report fraud to the financial institution.
- Regularly check your credit report to look for signs of identity theft, which may include accounts you don’t recognize or applications for credit that you never submitted. You can check your credit report for free at AnnualCreditReport.com or sign up for an identity protection service like IdentityIQ® that watches your credit report for you.
How IdentityIQ Can Help
Signing up for identity protection with IdentityIQ can help you avoid student loan scams or recover your identity when it gets stolen.
IdentityIQ offers several features to keep you safe from student loan scams:
- Identity monitoring. IdentityIQ monitors your credit reports to watch for changes that could indicate fraud. When new information lands on your credit report, you get notified so that you can take action.
- Bitdefender® antivirus. IdentityIQ plans include Bitdefender® antivirus software that can protect you from malicious websites, malware, and other digital threats.
- Virtual private network (VPN). With our VPN offering, you can browse the internet anonymously and keep your online activity from third parties who want to steal your information.
- Identity theft insurance. You can get covered for up to $1 million in losses related to identity theft, including legal expenses and professional services you use to recover your identity.
- Identity restoration. When you get scammed or your identity gets stolen, you get assigned to a dedicated identity restoration expert. They will help you create a response plan to recover your identity so you can move on with your life.
In Closing
Student loan scams have become sophisticated and harder to spot, and criminals often use AI to impersonate official organizations.
To protect yourself, only manage your student loans through official channels like StudentAid.gov or your lender’s website.
Remember that legitimate organizations will never ask you for money or personal information outside of your normal student loan payments.
IdentityIQ provides a safety net for student borrowers. By monitoring your credit, providing you with online protection tools, and watching out for your personal data on the web, we can help you prevent scams from taking over your life.
And if you do get scammed, our identity theft insurance and recovery assistance can help you minimize the damage and put a stop to fraud.
