You Should Never Have To Pay Money To Get Money

Legitimate lenders and student loan companies will NEVER ask for money up front.  They will generally take a percentage when everything is complete so that you do not have to pay out of pocket or they will tack their fee on the amount owed so you pay it back when you are in repayment.  Either way, you actually get what you pay for, which cannot be said for the scams described below.

Decorative Image of Admiral Ackbar from Star Wars Saying

If It's Too Good To Be True...It Probably Is

Student Loan Scams

Third Party Corporations

These corporations repeatedly contact borrowers about "services" they can offer on behalf of the borrower.  They require maintenance fees in addition to the loan payment in order to "consolidate" your loans, "manage repayment", etc..  Some cases we have seen even had borrowers sign over Power of Attorney to the company in order to "maintain" their Student Loans.

You do not have to pay anyone to do a consolidation, repayment plan change or loan rehabilitation for you!  There are no additional fees for any of these procedures.  You have worked hard for the money you have and any money spent on your student loans should go to your student loans.  You do not need any other company to work for you in order to successfully pay off your student loans; always work directly with your servicer to see what options you have available.  

Loan Consolidation Scams

Recent graduates are being hit with student loan consolidation scams promising to consolidate their loans for a fee (processing fee, administrative fee, consolidation fee).  Some scams will tell you it lowers your minimum monthly payment.  These companies will take your money and either do nothing, or they will move your Federal student loans into a private loan (loosing all the benefits that come with Federal loans).

Loan consolidation is when several loans are lumped into one loan so the graduate has one payment to make instead of many.  This can be a wonderful option for some graduates!  However, you should never pay money to have your student loans consolidated.  And consolidation just puts all of your loans into one place, it won't lower your balance.

This is the site you should use to consolidate your student loans, if you choose to do so.  It is FREE and takes only 30 minutes.  

Refinancing Fee Scams

This scam involves a company approaching you and saying that they will negotiate, on your behalf, with your servicer in order to get you a better interest rate on your student loans.  They will show you cases where other clients have saved thousands of dollars by working with them.  They will as for a fee in exchange for these services.

This is a scam not only because real lenders will not charge fees up front (they will instead take a fee when they close the loan, typically from the loan amount), but because you cannot refinance your Federal student loans.  Currently there is no way to change the interest rate on your student loans (other than loan consolidation, see above) and the only way that could change is if Congress passed a law allowing graduates to refinance their loans.  

Loan Elimination Scams

These scams involve a company contacting you saying that, for a fee, they can negotiate the settlement of your student loans (that is, paying a lump sum of money that is less than the amount you owe, usually pennies on the dollar).  They will take your money and nothing will change with your loans...because settlement is not an option with student loans!

Your Federal student loans are a contract between you and the Federal government.  There are only three ways to get rid of your student loans: the borrower pays them off (or some combination of payment with loan forgiveness), the borrower becomes totally and permanently disabled, or the borrower pass away.  You cannot negotiate the terms of the loan because they are set in Federal statute (that is, Federal law).  Go to the "Paying Off Student Loans" tab on the Financial Education Program's "Student Loans" page for legitimate repayment options.


FAFSA stands for Free Application for Federal Student Aid.  It has the word "Free" in the title, so you should NEVER pay money to file your FAFSA!  There are several sites that promise to help you fill out your FAFSA...after you pay almost $80 in fees.  While these companies will walk you through the FAFSA, there is no reason for you to pay for something that can be done on your own.  Also, the FAFSA has recently been shortened so it it quicker to fill out.  

This is the FAFSA site you should use and it's the one that's free!!

Instead of paying that money towards an application that's free to fill out, use that $80 on rent, tuition, books and other items that are related to your education!  

Recent Scams

Week of November 10, 2014

Telephone scammers targeting students at Missoula College and Bitterroot College are posing as police officers claiming that the student has committed a felony regarding their student loans and the University has turned the matter over to the police department.  The scammer states that the student has to pay immediately by credit card over the phone.

The University will never call students asking for payment over the phone, nor would they have a police department collect on their behalf. 

Students receiving such calls are urged to call law enforcement on the UM-Missoula campus. UM-Missoula Police can be reached at  406-243-6131. 

Week of September 22, 2014

Telephone scammers targeting students at the University of Montana-Missoula (and nationally) are telling students they must pay a fine immediately by giving payment information over the phone or they will be arrested.  Any students receiving such a call should not share any personal or financial information with the caller and should call legitimate law enforcement immediately.

The scammers are predominantly calling foreign students on the University of Montana-Missoula campus, but students at MSU-Bozeman, Penn State and in Georgia and Tennessee have also received calls.

The scam is particularly devious because the caller ID on victims’ telephones shows the MSU-Bozeman Police number. This is known as “caller ID spoofing” and occurs outside of the university system’s technological control.

More than 40 students reported the scam within the span of a few hours on Wednesday. Students report the caller sounds like he is calling from a call center as there are other voices in the background. Students have been told a variety of things: they owe back taxes, have an overdue tuition bill, or a fine and if they do not pay they will be suspended from school, deported, or arrested.

Students receiving such calls are urged to call law enforcement on the UM-Missoula campus. UM-Missoula Police can be reached at  406-243-6131. 

Week of April 14th, 2014

On the week of April 14th, an email scam promising student loan forgiveness/ consolidation through a private entity was sent out to student email accounts across the nation.  

While the phone number is disconnected or a non-working number, we believe that the point of the scam is for students to hit the "unsubscribe" link and then get a virus downloaded onto their computer.  

If you receive an email like this that is not from a UM email account, do not click any links; just delete the message.  

You NEVER have to pay a fee to consolidate your Federal Student Loans and the process takes only 30 minutes.  

If you have any questions about loan forgiveness/consolidation and how to go through those processes, please contact the Financial Education Program.