One of the sad realities of life with student loans is dealing with scammers. Many of the most dangerous scams piggyback on recent student loan news to take advantage of unsuspecting borrowers. The latest scam is a classic example.
FedLoan Servicing, commonly called myfedloan, has already announced they will not be renewing their contract with the Department of Education.
At present, borrowers don’t know who their new servicer will be or when the new servicer will be assigned.
This uncertainty opens the doors for scammers. Some scammers may claim to be the new student loan servicer, while others charge borrowers for a servicer transfer.
The good news for borrowers is that there are several ways to identify the scams and tools to verify that you are working with a legitimate federal loan servicer.
Loan Servicer Transfer Scams Often Include a Transfer Fee
Federal borrowers with loans serviced by myfedloan will get assigned a new servicer. The entire process is free of charge.
If an individual or company charges a fee to change servicers, it is almost certainly a scam.
Additionally, there isn’t a legitimate service that “helps” with servicer changes. The process isn’t always smooth, but paying someone to help is asking for trouble.
If you think you may have fallen for this scam, follow these steps to report the fraud, protect your assets, and get your money back.
How Loan Servicer Changes Work
The Department of Education has a system in place for loan servicer transfers.
Before any servicer changes happen, borrowers will receive a letter and/or an email from the Department of Education about the change.
For example, when the Department of Education announced the FedLoan Servicing change, the following email went out to borrowers:
Once the transfer is complete, borrowers will receive notification about the new loan servicer and contact information.
At this point in the process, borrowers simply need to verify that the new servicer is legit.
Verifying Loan Servicer Legitimacy
Given the number of scams, it might scare borrowers to work with a new company or provide personal information.
Fortunately, the Department of Education keeps a detailed database of all federal loans, including servicer names and contact information.
Unfortunately, it takes a few steps to find the database within the Department of Education site.
If you have any concerns about the new company that claims to be your loan servicer, checking the federal database should address the problem.
Be Patient: One of the downsides to the federal database is that it is only updated once per week.
If you don’t find your servicer in the Department of Education records, it is possible that the update hasn’t happened yet. Check back in seven days to verify.
Avoiding the FedLoan Servicing Transfer Scam
Like most student loan scams, the key is identifying the red flags.
If somebody tries to charge for a free service, it is a scam.
Loan servicer transfers are a headache, but they are a headache provided free of charge by the Department of Education.