Borrowers ask me a lot (I mean, all the time) whether a student loan company that has contacted them is “legitimate” or a “scam.” Most of the time, I’ve never heard of the company—or it sounds almost like a well-known organization in the student loan industry.
Without doing some research, I can’t say if it’s a scam or not. Luckily, our friends at NerdWallet have done that homework for us. They have compiled a list of debt relief companies with questionable services or unreasonable rates. You can learn about how they determined this list here.
Now, I was not involved with the creation of this resource (and I’m definitely not getting paid to promote it), so I can’t say without a doubt that every company on it is a bad actor. But I am naturally inclined to be wary of debt relief companies. Here’s why.
What Debt Relief Companies Do
We’ve cautioned you before (more than once) against paying companies to manage your student loans for you. I’m not trying to beat a dead horse, but I can’t stress enough how careful you need to be when you decide to work with one of these debt relief companies.
Legitimate debt relief companies can do things for you like apply for consolidation, income-driven repayment, or payment postponements. The problem is that you can do all of these on your own for free—as opposed to paying large, lump-sum fees or monthly fees (or both).
A company charging for such services isn’t doing anything unsavory, but there are bad actors that are. Just because a company is not on NerdWallet’s list doesn’t mean it has to be a good company.
Additional Warning Signs
I advise steering clear of any company that contacts you advertising that it will:
• Forgive your loans immediately without proof of income, employment, or discharge eligibility.
• Reduce your monthly payments to $0 without your income information.
• Reduce your interest rate on federal student loans.
No company can do these things for you. And I will never recommend working with companies that make unrealistic promises or demand upfront payment.
Do you have questions about a company you’re working with or have been contacted by? Do you have any experience with debt relief companies you could share with us (good or bad)? Sign up or log in with your Salt account to let me know.