Top Student Loan Scams

student loan scamWith billions of dollars being loaned to students each year, there is no doubt that there are scammers trying to get your money. Here are some common scams that are happening right now that you should be aware of when looking for student loans.


Advance Fee Scam

This scam involves a student loan company that tells you they can get you the “best” interest rate and loan terms, but you have to pay a “small” fee up front for this service. The fee can be anywhere from 1-5% of the loan amount.

If you come across this offer – RUN! There are no circumstances in which you should have to pay money to get money. Legitimate student loans, even from private lenders, do not require any fees up front. If there are any fees, they are deducted from the disbursement check or they are included in the repayment amount and are amortized over the repayment period.

There are two common fees that will be paid with the loan, but once again, never up front. Federal student loans charge a 1% default fee, but charge no origination fees. Most private loans charge some type of either disbursement fee or origination fee, but these are usually negotiable and vary widely from lender to lender.


Loan Consolidation Scam

After you graduate, it might be a good idea to consolidate your student loans. This is another area that is ripe with scams. The most common consolidation scam is one in which the company charges a consolidation fee, but actually does nothing. The fee is sometimes called processing fees, administrative fees, or consolidation fees.

If you have a federal student loan, there are no fees whatsoever for student loan debt consolidation.

If you have a private student loan, there are only FOUR lenders nationwide that offer consolidation loans. The companies are listed on, which is sponsored by the US Department of Education to help borrowers navigate the student loan process.


Student Loan Debt Elimination Scam

The important thing to remember about student loan debt is that it must always be repaid – it cannot be eliminated unless you have a federally qualifying reason (death, permanent disability, school closure, falsification of documents or identity theft). If you come across a company that promises to get your student loan debt eliminated, it is a scam!


It Feels Like a Scam

It’s important to remember that if it feels like a scam, it probably is a scam.  However, there are times when it’s not a scam, but it just seems like one.  For example, I get a lot of readers asking about the FedLoan Servicing Scam.  FedLoan isn’t a scam, but just a poorly run student loan servicing company.  Another one I get asked a lot about is NelNet, especially when it comes to their KwikPay Service.  Once again, not a scam, just a poorly run program.

I hope this helps you navigate the world of student loans a little better and avoid getting played.  If you want to know more, don’t forget to check out my Definitive Guide to Student Loan Debt.


Readers, have you ever been the victim of a student loan scam?

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  • Adam Kamerer

    Robert, this is a great article. I didn’t even know about some of these scams. Do you have any data on how many people fall victim to these each year?

    • Robert

      No I don’t. There is no central hub that tracks this, and the scams usually fall under labels like “Identity Theft” or “Fraud”. However, with student loans dispersing close to $100 billion per year, you know that there has to be more victims that you think.

  • Levi @

    I have fallen victim to a student loan scam. I had an outstanding loan that I was making payments on. I wanted to go back to school but I was unable to get funding aid while I still had my outstanding loan. I received a letter in the mail claiming I could have my student paid off and added to a credit card. I could then make payments on the card. They even offered me more credit on top of that.

    Well they sent me a Mastercard, added the loan to my balance, but never paid off the original loan. The student loan went into default and it was a big mess to clean up after.

    Moral of the story is stick to only to well known government back type of help when it comes to student loans.

  • Melissa

    I received a letter in the mail from a place in Orange, CA that called themselves Student Processing Center. Has anyone heard of them. They promised that they would consolidate my loans, after completing my associates degree in nursing, my bachelor’s degree in nursing, and halfway through my masters degree, I owe $51,000. They said that, based on my income and family size, they could decrease my payments to $30 per month, and after 25 years, whatever is left would be written off by the dept. of education. They said they require a fee of $599 up front. It sounds too good to be true. I asked if they were part of the DOE or a third party. The guy, “Kevin,” with whom I was speaking said they were a third party, but I would receive a contract and all the paperwork in the mail. However, I had to pay $599 over the phone before any of this would take place. I checked for this company on the BBB website and found nothing. Anyone ever heard of them? He said their website is StudentProcessingCenter dot com. I looked at it, but, like my husband said, anyone can build a website.

  • alisia

    What about Direct loans processing center. anyone ever deal with them?

  • David Diaz

    My fiance is working with a company called nationwide student loan, they are supposedly going to be able to consolidate her student loan debt by making payments of $133 for 6 months.Once 6 months of payments have been received they will qualify her based on her income $0 for 12 months and will apparently continue that process until the loan company for fill debt. Is this real?

    • Robert Farrington

      Doesn’t sound real to me. I would bypass the company and call the lender directly.

  • SteveLen80

    I wondered the same.. they want $599 up front to process an application with 2-4 months of skipped payments though.. i opted to go through much of the same info is entered, though the terms of repayment dont seem quite as long, though maybe thats not until you get the info from the new servicer, in my case nelnet and its free to try

  • Daniel Arturo Bahena

    Does anybody know anything about the Student Loan Support company? I called them at (866) 233-8481 ext.422 to get information, and it all seemed too good to be true. I couldn’t find anything wrong with it, but I also don’t feel like it’s legitimate. I need to know if anyone has had experience with Student Loan Support in the past. Please offer your experiences. Thank you.

  • cody

    I recently started dealing with I found them on Google and contacted them. they are not requiring me to pay anything but they consolidated my loans and because of my income they dropped my payments to $100 a month and after 20 years anything that’s left will be forgiven by the government. I haven’t made any payments yet and also don’t want to give them too much personal information. Is this a scam?

    • Robert Farrington

      I’d be concerned because it sounds like they are doing stuff for you that you could easily do for yourself if you simply called your student loan provider. Be careful.

  • Maggie

    SLC Processing did anybody heard anything about them?

    • Robert Farrington

      If it’s a company that wants you to pay them for a something, be aware. You should never have to pay to get your student loan payment plan changed, to get student loan forgiveness, or get deferrals, and more.