Student loan scammers exists on both ends of the industry spectrum. There are lenders who are trying to pull a fast one on student loan borrowers who are desperate to get out of their student loan debts. They try and take advantage of borrowers who wants to get out of their predicament so bad that they are willing to pay any fee just to relieve them of the debt.
Then there are also some student loan borrowers who tries to use the system to get absurd amounts of cash that they use for non-school related expenses. Some of them starts from actual student themselves who take out more than what they need to use the refund checks for trips in exotic places or even purchase expensive jewelry.
Triblive.com reported that a man is being charged for taking out fraudulent private student loans. Under the disguise of a student loan for his stepdaughter, he proceeded to deposit the money from the student loans into his business account. This is one prime example of misusing not only the student loan but the entire system as well.
On the other hand, Geneseorepublic.com shared that Attorney General Lisa Madigan has already filed lawsuits against student loan companies that are taking advantage and aim to exploit the borrowers current financial situation. They target struggling student loan borrowers who are looking for alternative ways to repay their debts in the easiest possible way.
This shows that the student loan industry needs safeguards on both ends of the lending program to protect the interests of the lenders and the peace of mind of student loan borrowers. Most people only see the need to put consumer protection and there is nothing wrong with that and it is actually something that a lot of borrowers would benefit from. But just as we are doing that, we also need to look out after the welfare of the lenders to enable them to continue providing financial assistance to students.
Giving out education in student loan management
One of the possible safeguards to the student loan industry seems to be right under our noses – education. Financial education to be exact and the challenge is to start them young enough that the students would be able to comprehend the gravity of student loans and it has a lasting effect on their finances well after they graduate from school.
Businesswire.com shares that this thrust on furthering financial education for students can be achieved on two fronts. One is to give them all the basic facts and how student loans will affect their lives prior to taking out the loans. This can be done earlier than the mandatory entrance counseling being given to federal student loan borrowers.
Another way to give out financial education is to catch the student loan borrowers as they are already trying to manage multiple student loan accounts. it is a great thing to teach theories on how student loans work and put ut scenarios to prove just how much of a hold student loans has over your life. But it is another to actually talk about something that they are already going through.
These can be given to student loan borrowers who are either already separated from school and within grace period or those that are already in repayment and blindly making out the checks with no concrete plan in mind. Financial education on student loans can be a great eye opener for borrowers who are making clueless payments on their student debt.
Student loan borrowers making repayment on their debt can be taught on how each federal repayment plan can benefit their monthly budget and their finances in the long run. It can also include a topic on possible tools to use when repayment becomes a little bit hard due to unexpected costs like medical emergencies or even car repairs.
Ignorance on student loans
One proof that students are not that knowledgeable about their student loans is a report by MoneyTalkNews.com on how accurate student loan borrowers are in keeping tabs on their student loan borrowing. Only about 52% of a research conducted at selected public universities were able to identify the student loan amount that they have taken out. But this is even at range of $5,000 more or less on their loans.
The same research shows that there were 25 percent of respondents did not realize that they had borrowed so much and underestimated their student loans. There were also 17 percent of student who thought they took out more and as a result overestimated their loan amount. The rest simply does not have an idea how much they have borrowed in student loans.
This research, although done in selected schools might be reflective of how most students see their student loans. Most of the borrowers might not be seeing the real effect of student loans in their lives. It is quite hard to be able to get a grasp of this because they are still in school and repayment does not start well after they graduate.
Lenders looking to protect themselves
There are also lenders who take legal steps to protect themselves from scammers. Madisonrecord.com shares that the National Collegiate Student Loan Trust filed a suit against a student loa borrower who borrowed $53,788.61 from them but has defaulted on the monthy payments.
There are lenders that are bringing borrowers to court because they are not making payments on their loans. For some, they are asking for a court order to garnish the wages of borrowers who defaulted on their student loans but are holding regular jobs. Private lenders are not able to do this automatically compared to the federal government.
Student loan borrowers against scam companies
Student loan borrowers need to be vigilant as well in making sure that they do not fall into the trap of companies who are out to scam their ways into borrower’s hard earned money. Here are some of the things to be on the look out for when choosing to work with a student loan company.
- Collecting fees. The number one telltale sign that you might be dealing with a scam company is if they insist on collecting upfront fees for the services that they have yet to perform. In fact, it is illegal to collect for upfront fees that is why some legitimate companies are assessing their fees only after the job is done.
- Offering services you can get for free. You need to make a little research to know what programs you can qualify for without paying any fees. This is because some scam companies might be charging you for these free services. Take for example a Direct Consolidation loan, you can apply for this program at no cost but some companies might offer to enroll you in the program for a fee.
As borrowers, you need to be vigilant against scam companies to prevent falling into deeper debt. Lenders are also on the defensive and offensive against student loan borrowers looking to take out a loan and run away without paying for their debt. Student loans are meant to help students achieve their dreams of higher education to prepare for their future but being vigilant against scam companies should be a priority.