Tips for Preparing Tomorrow’s College Students Against Financial Predators

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When students are relatively safely ensconced in their high school experience, parents and educators are actively engaged in their efforts to prepare them academically for the rigors of college or university studies. This is as it should be, of course, and the students themselves need to play a personal role in the academic preparation, as well.

However, we are quick to remind families that there are other parts to the equation that will help students to make the transition to being away at college a smooth and successful one, and some of them have less to do with their Grade Point Average and standardized test scores. However, they are vitally important to helping a student adjust well to college or university… and to helping him or her be able to stay there and graduate!

One of these (often overlooked) preparations – and one that can literally wreak financial havoc on a student’s college experience and the family budget – is the surprising amount of financial predators waiting for the freshman crop of students each and every year across the country. We are not talking about smooth-talking people in overcoats standing on street corners, or people selling empty computer boxes from the back of a windowless van. Rather, we are talking about companies – some of them quite well-known and even well-respected – who attempt to lure college freshman (and their parents) into debt, scams, and other financial risks.

This month we want to take a few moments to point out some of these strategies, which are important both for future college and university students, and for their parents. The more young people are prepared for college, and actually understand the elements of college funding and financial well-being, the lower the chances that a student (and his or her family) will be victimized and wind up in serious financial trouble… or even out of school entirely for financial reasons.

Unfortunately, this type of thing happens to unwitting students – even some very smart kids – each and every year. Let’s each do our part to make doubly certain that YOUR budding college student does not become one of them!

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Loan Scammers Are Waiting For Kids – And For You

Student loans are BIG business… and any time there are large amounts of money at stake, there will be some sharks patrolling the waters. These unscrupulous people will prey on anyone possible, and they take unfair advantage of the fact that student loans and student financial aid can seem very complicated. This system is often perceived as overly complicated, even by people who are professionals, so it is not that parents are unintelligent! However, if one does the proper research and homework, mishaps can be avoided. There are many come-ons and scams that abound and many of these scammers will target you and your child even while s/he is in school in order to extract private information.

We all know that Grandma said “If it sounds too good to be true, it probably is.” Making ridiculous promises one of the prime tactics used by many of these scammers looking to lure in unsuspecting students and their parents. They will often promise many things that are not possible. Here are just a few to look out for:

1. Loan forgiveness and/or extremely low payments
Lowered payment and even loan forgiveness options are available, but these are often only for federal loans and must be worked out directly with the loan servicer. If a service is promising that they can provide a better deal that the student can garner for him or herself, that is just simply not true.

Many of these companies will also want the contact information for the loan changed over to their own contact information. This is a huge red flag! Be careful about doing this because the borrower should always be full abreast about what is going on with the student loan. Changing the contact information will keep the borrower out of the loop and makes families more vulnerable to changes that will not be in their best interest.

2. Super low interest rates or “special tuition deals”
There are few options when it comes to refinancing a student loan. A come-on for scammers will be the offering of a really low interest rate to prospective borrowers. The refinancing options available now are quite simple and offer variable and fixed rate options. It is important to understand exactly what is detailed in the offer so borrowers don’t end up paying exorbitant rates unknowingly. They may also claim to offer special tuition rates for certain students that do not exist.

3. Offering help from default…with a fee
There are currently only three ways to obtain help from a student loan default – which is a situation we are eager to help families avoid entirely, please feel free to ask us how.

The first option is to pay the loan in full. The second is rehabilitation. The third is consolidation. In order to be eligible for the latter two options, some payments need to be made. Then the loan servicer is required by the federal government to make the payments affordable to the borrower. Not every company offering to help with a default is necessarily a scammer, but the fee should be in alignment with the service. One should be very suspect if the fee charged is exorbitant when the service does not call for it. And, this is also something that can be negotiated with the borrower and the servicer directly…often with no fee at all. Remember, though, that the best way to manage a default situation with a student loan is to avoid it entirely!

4. Tricky logos meant to deceive
There are a surprising number of companies that are attempting to lure students into their programs using logos that look suspiciously like the U.S. Department of Education logo. Do not be duped by these look-alike companies. If at all concerned, it is much better to check with the DOE or the Better Business Bureau to determine the validity of a certain company, than it is to get scammed.

In addition, the loan servicer should be the first stop if there are any questions regarding the student loan. They are often more than willing to help and are even required to make things manageable! The loan servicer does not ever charge fees to consult with borrowers and if there are any situations that arise, students can contact a Student Aid Ombudsman appointed by the U.S. government.

5. Debt-relief services
These folks prey on the most vulnerable. If someone is searching for help to get out of student loan debt, he or she often feels overwhelmed and concerned. Many of these companies will target students and promise a massive reduction of their student loans but they are required to come up with some massive up front fees in order to make it happen. Some of these fees are upwards of $1,200 and were often charging for services offered currently free of charge.

6. Promising non-existent programs
Many of these scam companies will offer scholarship, financial aid, or loan programs that simply are not available. Or, they will misrepresent a government program and claim it as their own and charge the borrower a fee for it. If the company is sketchy up front about fees, or cannot produce verifiable details about their programs, we urge you to head out the door.

7. Give-aways
Sallie Mae, the U.S.’s largest loan servicer, in 2013 offered a loan sweepstakes and the winner of the prize would have a portion of their student loan reduced. This sweepstake created a lot of buzz. That was precisely what scammers needed in order to cash in on this deal. These scammers created their own sweepstakes, also purporting to be through Sallie Mae, but it was completely fake. They would ask for borrowers’ email addresses and other personal financial details, which offered hackers free rein to their personal information!

Scammers know that students are often desperate to get out of debt. They prey on this desperation. Many will claim to be affiliated with government programs when, in fact, they are not. When it comes to managing a large sum of debt like a student loan, it is important to do the homework necessary to vet certain companies before becoming involved with them. With student loan debt reaching $1.2 trillion, these scammer entrepreneurs are doing all they can to get in on the action.

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Of course, fiscal preparation for the college years goes far beyond simply helping students to avoid financial predators. In fact, without proper financial preparation for higher education, even very smart and gifted students can find themselves left out in the cold, or being forced to study at an institution that is far below his or her deserved academic level. We see this each year in some cases, unfortunately. Given the opportunity, however, we are able to help virtually any family prepare for the expenses of college, and we are happy to help. In addition to our direct financial advisory services, we also offer a number of additional educational opportunities to help with this important element of the college process. It is important to seek out a knowledgeable and trustworthy professional in the world of college funding, and we are among the very best in the business.

One of our most invaluable teaching activities for parents is called the College Funding Workshop. These workshops deliver first-hand information to the parents of college-bound students, and they are presented by experienced college funding professionals who are experts in the field. The workshops are a terrific springboard into the world of college funding information for parents. We would be delighted to welcome you to an upcoming workshop that works with your schedule.

Now, please remember there is no admission fee for these workshops, but it is necessary for us to require a reservation because of restrictions on space and management of an optimal learning environment. If you would like to receive more detailed information about our workshops, or wish to obtain a reservation for a specific workshop date or time, you may call our workshop crew toll-free. It will be our pleasure to help you with your workshop-related needs at (651-455-0621).

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