Don’t fall for debt-relief scams on student loans

Got student loan troubles? Don’t create bigger headaches by falling for one of those “Obama Wants to Forgive Your Student Loans” tweets, emails or online ads.

The ads might be tempting, especially when you’re short on cash but still owe $400 a month toward student loans. But experts warn that more often than not, you’re looking at costly fees from some debt settlement companies.

“The rule of thumb is if an email has the word ‘Obama’ in it, it’s a scam,” said Chris Dlugozima, community educator for the Green Path Debt Solu- tions office in White Plains, N.Y.

In March, President Barack Obama proposed a Student Aid Bill of Rights. His memo directs the Department of Education and other agencies to research options that could make repaying student loans more manageable. Nothing is final yet.

But you need to know that student loan debt relief outfits charge fees for many services that borrowers could obtain on their own for free.

Do you need to be paying $20 or $30 a month or more to sign up for a repayment plan that you can obtain for free?

Mark Kantrowitz, senior vice president and publisher for Edvisors.com, said terms in online ads exploit the desperation of borrowers. Many students aren’t aware of what they’re able to do on their own — for free.

“Consolidating federal education loans is not rocket science,” Kantrowitz said. “It takes just a few minutes.”

Borrowers can consolidate the federal loans for free at StudentLoans.gov.

Kantrowitz said borrowers should also realize they can consolidate their federal student loans into the Direct Loan program at StudentLoans.gov, even if their loans are held by a private lender in the old Federal Family Education Loan Program.

Many college graduates want to consolidate to make things more streamlined and replace anywhere from six to up to a dozen federal student loans with one single loan.

Since federal education loans have fixed rates, one doesn’t need to consolidate to lock in a rate, Kantrowitz said.

The Consumer Financial Protection Bureau noted in prepared remarks for a field hearing on student loans that it is launching a public inquiry into student loan servicing practices. Loans can move from one servicer to another and transfers can create headaches.

Many times students do not know what loans they have or the type. Go to the National Student Loan Data System Web site to track all your federal student loans at www.nslds.ed.gov.

Gerri Detweiler, director of consumer education at Credit. com, said you want to know if loans are federal or private student loans because some generous repayment options exist for federal student loans. When it comes to private student loans, repayment options are at the discretion of the lender.

What you do not want to do is consolidate private student loans with federal student loans because you’d lose the generous repayment options of those federal loans. Also, federal student loans are usually less expensive than private, so it won’t save money to consolidate them into a private student loan.