If someone promises that they can eliminate student loan debt, it’s a scam.  With Americans owing over $1.48 trillion in student loans, it’s important to know how to avoid student loan scams.   Don’t fall victim to student loan forgiveness scams from debt relief companies. Learn what to watch out for and what are your legitimate options for student loan debt relief. As a student loan lawyer, I even caution borrowers to do their research when contacting a lawyer for help.  Student loan debt is a newer area of law for attorneys and not all have the experience and knowledge of how student loan debt relief works.  As I take you through how student loans operate and how to avoid student loan scams, the first words of caution I have for you is to never pay anyone up front for advice.


How to Avoid Student Loan Scams

how to avoid student loan scams
Avoid student loan debt relief scams and start your path to a debt free life.

Before I take you through ways to avoid student loan relief scams, it’s vital to understand the difference in private and federal student loans, as well as what happens if you default on your student loans.  People often do not even know if their loans are private, federal or a combination of both.  Understanding what to do with these loans can be complicated, as private and federal student loan debt relief are very different.  With student loans being so difficult to maneuver, student loan scams are on the rise.



A federal student loan is money borrowed from the government.  Student loan debt relief companies may promise to negotiate a better deal on your federal loan, but this is not possible.  Federal law sets all of the parameters of your federal loan. A student loan debt relief company cannot negotiate a better rate with the federal government and any promise to do so is a scam.  And you do not need to hire someone to get into one of the government’s repayment plans, such as an Income-based repayment plan or “Pay as You Earn”.  Anyone can do it on their own as long as they are current on their federal student loan payments.  These programs are also referred to as “student loan forgiveness programs”, but just because you enroll in one of these programs does not mean that you will eliminate your student loan debt, as many student loan debt relief companies promise.  The goal with these programs is to get into a program that you can afford, and/or to see if you can qualify for deferments or forbearances.

If you have not made a payment on your federal student loan in 270 days, then your federal student loan will be considered in default.  Student loan debt relief companies often prey on borrowers who are in default.  But just like getting into a repayment plan can be done on your own, you can get your loans out of default with a student loan rehabilitation plan via the federal government.   Once you have “rehabbed” your loan, then your loan will be back in good standing and you can then qualify for one of the above-mentioned government repayment programs (or “student loan forgiveness programs”). I have helped many clients to get into these programs, but with the complete understanding that they can do this on their own.  The federal government programs can be tough to navigate, so it’s more a matter of convenience when someone comes to me for help with federal student loans.  Also, as a student loan lawyer, I can represent you if you are sued by the federal government for non-payment.


For example, our client had defaulted on her federal student loans many years ago when she lost her job and couldn’t afford the payments. The U.S. Department of Treasury notified her that they had intercepted her federal tax refund to apply toward the balance of her federal loan. Although she could have done this herself, she wanted help getting into a federal loan rehabilitation program.  We got her into one in which she will make 9 monthly payments of $5 per month. Once she completes these payments, she will no longer be in default, the negative marks will be removed from her credit report, and she will be qualified to go into a loan repayment program (or “student loan forgiveness”).  Loan rehabilitation’s can be tricky, but you can do it for free yourself. 


Another client had stopped making his federal student loan payments and owed over $15,000 on the loan after a Chapter 13 bankruptcy that lasted 5 years. Since the federal student loan survived the bankruptcy, the Department of Education sent the account to Performant Recovery to collect the student loan debt. We negotiated with them to settle the account for $8,000.   Our client was able to avoid his wages being garnished and was finally able to put his federal student loans behind him.



A private student loan is borrowing money from a private lender or bank, not unlike taking out a credit card.  Most of these loans are unsubsidized, meaning that you need to start making monthly payments on them as soon you receive the loan.  And unlike federal student loans, most private loans do not allow for hardship exemptions, deferments or forbearances.  Private student loans are also vulnerable to variable interest rate changes and economic factors, such as inflation.  There is often a co-signor on a private student loan, so it’s not just the student loan borrower who is held responsible if the loan goes into default.  A private loan is considered in default if a payment has not been made in 180 days.  Generally, student loans cannot be dismissed in bankruptcy, so a negotiation for a debt settlement is often the best course of action for those in default.  Your credit will take a hit at first, but then once the student loan debt settlement is complete, your student loans will be taken care of and your credit score starts to rise – rather than declining as it was when you were stuck in default.

Anyone can also negotiate a settlement for a private student loan.  You do not have to pay a student loan lawyer to negotiate a settlement, although an experienced lawyer can most likely get a better deal.  Just make sure you are not paying outrageous legal fees.  The goal of an honorable student loan lawyer should be to help get their clients out of student loan debt troubles while saving them moneyStudent loan debt relief companies are not the same as student loan lawyers.  Legally, debt relief companies cannot ask for up-front fees to negotiate a student loan settlement.   Plus, attorneys are held to ethical standards under the law that debt relief companies are not.


For instance, our client owed over $67,000 on her private student loans. When she defaulted on the loan she was sued in Los Angeles County Superior Court.  We were able to negotiate a student loan settlement without her having to appear in court.   The result was that our client will pay back $40,000 (instead of the full $67,000), with no interest, over an 84-month period of time with payment amounts starting at $300 per month and gradually increasing to $583.33 per month. Our client was able to avoid trial, is now in a repayment plan she can afford, her total amount of the debt due is reduced, and she no longer has the burden of being in default on her student loan.


The value of an experienced student loan lawyer cannot be overlooked when it comes to complicated student loans, as this example points out.  Since we offer a free consultation to go over debt relief options, our client had simply come in so we could review a student loan settlement offer he had received.  The settlement offer was from student loan servicer North Star Location Services on his private student loans originally owed to the giant student loan servicer Navient.   He had originally owed over $60,000 and they offered to settle with him for about $6,000 (10% of the total amount due).  Upon reviewing the offer with our client, we realized that our client had not made a payment on his loans in over 4 years, meaning he could no longer be sued over this debt.  As a result, we convinced North Star to accept $5,000 to settle the debt.  Our client was ready to move on and was willing to pay that amount, so he could start rebuilding his credit. He paid our law firm a very small amount and was able to save an extra thousand dollars on his settlement.


Common Student Loan Debt Relief Scams

Don’t fall victim to student loan scams.  If a debt relief company tells you they can eliminate your student loan debt, they are pulling a student loan scam. Here is a list of some of the most common student loan debt relief scams.


Never Pay Anyone Upfront for Advice

Whether it’s a student loan lawyer or a student loan debt relief company, do not pay anyone up front for advice on what to do with your student loans.  You should go to someone who offers a free consultation to go over your student loan debt relief options.  And absolutely never give your credit card number over the phone to anyone who offers to wipe out your student loan debts.


Do Not Pay Up-Front Fees to a Student Loan Debt Relief Company

There are reputable student loan debt relief companies out there, and they won’t ask for large fees up front before learning about your situation and mapping out a plan.   Also, remember it is illegal for non-attorneys in debt relief companies to take cash up front for a student loan debt settlement.


Steer Clear of Those Who Offer to “Eliminate Debt”, “Cancel Debt” or Promise “Immediate Loan Forgiveness”

It is simply false that your student loan debt can be wiped away. Avoid student loan debt scams by steering clear of anyone who promises to make your debt completely disappear.


Debt Relief Companies Can NOT Negotiate a Better Deal with Federal Student Loans

Payment rates set by the federal government for student loan forgiveness programs, such as Income-Based Repayment Plans, are set by Federal Law and cannot be negotiated. Period.


Avoid Any Student Loan Debt Relief Company Who Says They Will Put You on A Payment Plan for Federal Student Loans

There are no payment plans for federal student loans outside of the Department of Education.  Offering to put someone on a payment plan for federal student loans is one of the most common student loan scams.


Be Wary of Student Loan Debt Consolidation Scams

Consolidating your loans basically means combining your multiple loans into one new loan.  This can make your life easier by only having to manage one loan. If the interest rate on the new consolidated loan is less that than previous loans’ interest rates, this can end up saving you some money.  However, many offering student loan debt consolidation are charging unnecessarily high fees for processing and administration.  And the balance of your loan does not change.  Just the interest rate.  So, unlike a student loan settlement, in a consolidation you end up still paying the full about of your student loan debt due.  If someone offers to consolidate your federal student loan, remember you can do it yourself with help from the Federal Student loan website.


Avoid Student Loan Debt Scams

People with student loan debt, especially those in default, are already in a vulnerable position.  Student loan debt relief scams are growing, so do your research and follow your gut.  If someone is pressuring you too hard, if they are asking for personal information over the phone, if their marketing is over-the-top and too good to be true – then it probably is.   Make sure you talk with someone who will listen to your unique situation and offer options for student loan debt help in a free consultation.  Most importantly, make sure the student loan lawyer you choose to work with has experience and has achieved success for their clients.


debt relief lawyer in san diego california

Daniel R. Gamez, an attorney focusing exclusively in debt relief, is licensed to practice in all state and federal courts in California and Texas. Mr. Gamez owns and operates the Gamez Law Firm in San Diego and Los Angeles, California and serves clients nationwide. For more information, please contact Daniel Gamez at 858-217-5051, daniel@gamezlawfirm.com or use our online contact form. Stay updated about the latest debt relief tips by following on Facebook and Twitter and read about client success stories on our website.