Types of Student Loan Consolidation Scams

Types of Student Loan Consolidation Scams

Taking into account the volume of consolidations and the student's inevitable need to consolidate their loans for better management, there are unscrupulous people who are involved in fooling students.

• Bribery: The first and the most common form of scam is by bribing the educational institution to recommend a particular organizations' consolidation scheme without giving a choice to other more beneficial options.
• Fraud committed by Impersonation: Applying for a loan making use of the details of a genuine student. These frauds come to light only at the time of repayment, because that is when the student would get notice about the repayment dues of the loan he did not apply for.

Effects of Student Loan Consolidation Scams

• Students trapped unknowingly in impersonation fraud face the consequences of repayment and legal action.
• Students desperation to get a consolidation loan forces them to provide critical details to unreliable sources and puts them at considerable risk.
• Students are not given the best choice of loan consolidation due to the collusion with the lending institution.
• There is a heavy repayment burden and the high cost of loans endanger the students.

Precautions Against Student Loan Consolidation Scams

Student loan consolidation in general is NOT a scam, although some consolidation companies can use marketing tactics to make you think you are getting something you are not!

It is always best to do a federal loan consolidation (versus a private loan consolidation) with your Stafford and PLUS loans. This allows you to change your interest rate from a variable interest rate (that can go up each year) to a fixed rate (the rate won't change from year to year).

• Do a federal loan consolidation (versus a private loan consolidation)
• Do not provide critical information to third persons and unreliable sources.
• Do not show your desperation to third persons.
• Do not opt for the first lender for consolidation loans.
• Perform enough research before accepting or proceeding with a consolidation loan.
• Be informed about of the various scams.
• Never ignore any piece of information and unsolicited letters in your name.

What To Do If You've Been Scammed

The first thing you should do if you believe that you have been scammed by student loan consolidation fraud is to write down details regarding your interactions with the company. Then, contact your creditors and the Better Business Bureau so that they become aware of the scam.