Student Loan Scams: Types, Effects, and Precautions

Student loan consolidation is a step ahead, namely, the citizen should be carry a less a repayment burden as feasible when he or she has completed education and is earning. The concept of student loans is founded on the principle that education is too high a national need to be compromised at the altar of financial constraints.

Despite these high principles and their practice, there are – as always – unscrupulous people around who are out to make quick bucks at someone else’s expense. Not surprisingly, student loan scams abound in the United States. This article looks at the forms of student loan scams and their effects on the victims. It later also looks at one cardinal precaution you should take when the time for student loan consolidation comes.

STUDENT LOAN SCAM TYPES:

Though cheats are an innovative type of people in the sense that they innovate newer ways to cheat, there are basically two typical forms of student loan scams in the United States as of now. They are impersonation, and bribery.

• Impersonation: Here, a genuine student’s identity details are stolen by a crook. This crook then uses the stolen identity to apply for, and obtain, big amounts of student loans. Since repayment against student loans starts after the completion of the study, this crime is not immediately detected and the crook has ample time to work out a hiding strategy.
• Bribery: Here, the college or university (or one or more employees) are in a cahoots with a student loan lender. The former agrees to persuade its students to choose that particular lender. In return, the lender gratifies the institution, or its employee/s concerned, with cash or articles of value. The student is the loser because he gets to choose only from the limited variety of loans offered by the particular lender.

EFFECTS OF STUDENT LOAN SCAMS ON STUDENTS:

If a student is a victim of the impersonation type of scam, he or she will be left with the responsibility of having to repay a loan he or she never took. This can be quite a big burden. Refusal to pay will give the victim a bad credit history which will drastically reduce his or her creditworthiness in the market. Of course, the victim can seek redress in the court of law, but it will be very difficult to prove that a fraud has been committed. This is even more so because of the time gap between the commitment of the crime and its discovery by the victim. In extreme cases, the victim may be barred from attending any form of further education.

Use of Consolidators to Reduce Loan Scams

Student loan consolidation, being a specialist activity, is usually (and should) be done through agents, who are called ‘consolidators’. The consolidators are not lenders; they are intermediaries between the lender and the borrower.

Consolidators usually act on a commission basis with the commission paid by the lender. The scope for scam in consolidation lies in the offer the consolidator makes. Some lenders may give a higher commission for a particular consolidation package; so the lender will try to push that particular package even though better packages are available to the student if he scours the market.

Protect Yourself from Student Loan Scams

Protect Yourself from Student Loan Scams

1. To protect yourself from the impersonation type of student loan scam, just do not divulge your critical identity details to anyone.
2. For protection against the bribery type of scam, never go for the first lender who offers you a student loan.
3. Always ask for offers from three or more consolidators and take the best. Always treat with suspicion any specific lender recommended by the institution in which you are pursuing your education.
4. The same precaution of seeking and comparing three or more offers will also give you reasonable safety from student loan consolidation scams.
5. Finally, don’t show desperation for getting a student loan, or consolidation, because desperate people are easy prey to crooks. Even if you are really desperate, don’t show it.

How to Deal with Student Loan Consolidation Scams

Crooks exist in every society. They are an ingenuous community by way of devising newer ways to cheat people. Student loans and student loan consolidation offer scope to crooks to cheat on unsuspecting students. Impersonation and bribery are the two typical forms of student loan scams. However, you can protect yourself from such scams to a considerable extent if you exercise due diligence and do not jump for the first lender or consolidator you meet. If you are desperate, don’t show it because desperate people are soft targets for crooks.