ALERT: Loan repayment companies scamming students by charging for free service
FRANKFORT, Ky. (WTVQ/Press Release) – The Kentucky Higher Education Assistance Authority warned Friday that if Kentucky students owe money on federal student loans, they should watch out for scamming loan repayment companies.
The companies offering to help students lower their payments may be charging large fees for services available for free.
“My administration will always put education first, and part of that means protecting Kentucky students, after they’ve graduated, from predatory companies trying to take advantage of them as they pay back the loans that helped them pursue their education goals,” Gov. Beshear said.
Some third-party companies claim to offer document preparation services and act as though they can help students qualify for a loan forgiveness program, but they may want upfront fees and personal and financial information. The Federal Trade Commission says it is illegal for companies to charge upfront fees before providing debt relief services.
The Governor and KHEAA warn borrowers to be skeptical about companies that:
- Ask for payment up front and for monthly fees to monitor an account;
- Promise immediate loan forgiveness; or
- Ask for a student’s FSA ID password and a power of attorney.
“To avoid falling victim to a scam, start with the servicer the Department of Education has assigned your loan to,” said Gene Hutchins, executive director of the Kentucky Higher Education Assistance Authority. “Your servicer can tell you what your options are and can help you with the forms you need. And unlike these scam companies, your servicer will never charge you a fee for their assistance.”
If a student doesn’t know what his or her servicer is, that information can be found at https://studentaid.gov/h/manage-loans.
This is KHEAA’s Money Tip of the Month.
KHEAA is the state agency that administers Kentucky’s grant and scholarship programs, including the Kentucky Educational Excellence Scholarship (KEES).
The agency also provides financial literacy videos at itsmoney.kheaa.com and free copies of “It’s Money, Baby,” a guide to financial literacy, to Kentucky schools and residents upon request at firstname.lastname@example.org.
KHEAA’s sister agency, the Kentucky Higher Education Student Loan Corporation (KHESLC), offers low-cost Advantage Loans to help students and parents pay for college or refinance student loans. For more information about Advantage Loans, visit www.advantageeducationloan.com.
Many of KHEAA’s student aid programs are funded by Kentucky Lottery receipts.