A teacher in Wisconsin recently received a call with an intriguing offer: a promise to have 80 percent of her federal student loans forgiven — for a fee. The teacher, who owes about $60,000 in debt, was interested in hearing the company out.
She pressed the caller for details, but the agent abruptly hung up. This was not an isolated incident, as she receives similar calls about once a week from companies claiming to help erase her student debt.
Many of these companies are scams, and changes to the student loan program are providing more opportunities for them to target the roughly 40 million adults in the U.S. with student loan debt.
The outlet found more than two dozen companies promising to help win loan forgiveness, many of which take fees of hundreds of dollars for doing nothing or for filling out paperwork that the borrower could easily complete themselves.
Student loan scams have been operating for years and have eluded multiple efforts by regulators to quash them. They often become particularly active during periods of significant change to the student loan program.
Now, as student loan repayment rules shift and the administration reduces oversight of the student loan system, these companies see an opportunity to capitalize on borrowers’ confusion, experts say.
“There’s a lot of chaos in the industry right now,” said Betsy Mayotte, president and founder of The Institute of Student Loan Advisors. “It’s a great time if you’re in the scam business, because people are vulnerable.”
Student loan borrowers enjoyed a long reprieve from making payments during the pandemic, but the requirement to make regular payments resumed in October 2023. Borrowers are looking for practical paths to success in managing their debt.
In May 2025, the U.S. Department of Education said it was restarting collections on defaulted student loans, but ultimately backed off earlier this year. Then, this March, a federal judge’s ruling effectively ended an income-driven repayment program called SAVE.
Borrowers often find it difficult to get clear answers about repayment options from the companies that administer their loans. Samuel Levine, who led the Bureau of Consumer Protection at the Federal Trade Commission, said the actual student loan servicers are not doing their job.
“They’re understaffed, they provide poor customer service, they’re hard to contact, they steer people into high-cost lending products,” he said.
Cuts at the Department of Education have meant fewer staff overseeing those servicers, and federal officials recently announced that they will shift oversight of student loan servicing and collection from the Department of Education to the Department of the Treasury.
Under the administration, the federal government has also scaled back its efforts to go after scammers. Last April, the Consumer Financial Protection Bureau published a memo stating that the agency was deprioritizing student loan scam enforcement.
The Consumer Financial Protection Bureau has recovered more than $21 billion for consumers from a wide range of companies, including student loan scammers.
For their part, the companies who service student loans say they are doing the best they can with the resources the government gives them. Scott Buchanan, executive director of the Student Loan Servicing Alliance, said being vilified by nonprofits just adds to confusion among borrowers.
Many advocates for student loan borrowers disagree. “Across the board, this administration really has turned its back on people who are buried in student loan debt,” said Levine, now the commissioner of New York City’s Department of Consumer and Worker Protection.
Borrowers who fall for scams promising loan forgiveness can find themselves in a deeper financial hole. Bonnie Latreille, a senior fellow at Princeton University’s Debt Collection Lab, said scammers often charge a large up-front fee and enroll victims in auto-payment for monthly fees.
Defaulting on student loans brings more consequences than failing to make payments for other types of credit. Wages can be garnished without a court order, and government benefits can be reduced.
“When you default on a student loan, the entire weight of the federal government comes to collect,” said Latreille. “And there’s no statute of limitations. It’s a lifetime harm.”
Student loan delinquency has grown to a record high, with 7.7 million borrowers now in default, according to recent Education Department data.
Many of the loan forgiveness schemes are clearly illegal, said Latreille, especially when companies misrepresent themselves as affiliated with the government.
Some companies, like FSLA RELIEF, promise to help borrowers enroll in fictitious government programs. The site features a graphic that says “USA Forgive Sponsored by DOGE,” referring to the Department of Government Efficiency, established by the administration.
A disclaimer in smaller print at the bottom states that the company “is not affiliated with or endorsed by the U.S. Department of Education or any government agency.”
Misinformation about student loans has been circulating on social media, stirring confusion about what programs are available for borrowers struggling to make payments.
One TikTok post last year shared by hundreds of thousands of users wrongly stated that borrowers could file a claim to have their loans forgiven because DOGE had accessed a student loan database in violation of federal student privacy laws.
Popular AI tools like ChatGPT also do a bad job of answering questions about student loans, research has found.
Predatory loan forgiveness companies often make a hard sell to potential customers, said Levine, who listened to recorded scam calls while at the FTC.
“The scammer says, ‘I am from the U.S. Department of Education. We wanted to let you know that this is the last month that you can lower your payments,’” he recalled.
Other types of student loan repayment companies offer services that are legal but operate in a moral gray area, experts say. Companies known as document prep companies promise a service that experts say brings little benefit.
“We’ll handle the detailed process so you can focus on what’s important. Leave the headache and sea of confusing paperwork to us!” says the website for one such company, called Alumni Counseling Service.
Mayotte said that unlike filling out tax forms, applying to most student loan repayment programs is straightforward. “The amount of information borrowers have to send to the document prep company is the same amount of work as if they do it themselves,” she said.
She added that the costs can exceed that of using an outside tax prep service, with flat fees of up to $1,200. Borrowers can find free resources, such as career-focused high schools, to help manage their debt.
Mayotte is pushing to educate consumers so that they don’t need the services these companies are selling. “We need to first of all create awareness that people don’t need to pay for help with their student loans,” she said.
There are plenty of free resources where borrowers can find information, including student loan ombudsman offices that have been set up in at least 14 states and the District of Columbia.
Levine agreed that consumer awareness is important, but said that scammers are savvier in how they reach borrowers than “the good guys” are. The best approach, he argued, is for state and federal governments to focus on vigorous enforcement.
That is especially true, he said, now that new tools allow scammers to have AI voice agents make calls so they can reach even more potential victims. “It has never been easier to scam people.” The issue of student loan scams also highlights the need for better research on the subject to prevent such scams.
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