By Amanda Black
Associate Director of Communication and Financial Literacy

What could be worse than paying back a huge federal student loan?

How about getting tricked into paying hundreds or thousands of dollars' worth of so-called processing fees on top of your debt?

Navigating repayment options and understanding loan consolidation can be an overwhelming and time-consuming task. Consequently, for-profit companies specializing in federal loan repayment and consolidation are specifically targeting young adult borrowers with offers to help complete paperwork and lower payment plans.

These organizations assume that student borrowers lack experience with financial products and terms and set out to make enormous (and, some would say, unethical) profits off vulnerable borrowers. They lure customers in by marketing services that lenders and loan servicers provide for free.

What a scam looks like: one Saint Leo student's experience

Denzel Stallone* graduated from Saint Leo University with an MBA in 2011. Recently, a company called Strategic Student Loan Results, LLC** contacted him. The company offered to consolidate his multiple loans into a single monthly payment. They also said that they could lower his payment by enrolling him in the Public Loan Forgiveness Program.

"I gave the representative my social security number and other information, and he was able to pull up all of my loans – how much I had borrowed and when," Denzel explained. "He had all the right information. So I assumed it was a legit company since they had access to my data." The company was local to central Florida (where Denzel resides), which he felt also lent to its credibility.

Because Denzel wanted to save money and have the convenience of making one monthly payment, he signed a lengthy contract and submitted it electronically. However, after doing so, obtaining a copy of the document for his personal records became impossible.

"I requested a copy of the contract several times. But every time I called, I was either put on hold or transferred only to have my call dropped. Nobody would help me get a copy of what I had signed."

Several months later, Denzel's credit card began to reflect regular charges to Strategic Student Loan Results. He knew that the company would be charging a $49.99 service fee, but did not know for how many months. He began to worry that the fee might be charged indefinitely.

At the time that this blog was published, Denzel was still unsure as to how much of his monthly charge is going towards his loans and what amount is being pocketed by Strategic Student Loan Results. He is still trying to get a copy of his contract and fully understand his charges.

Don't pay: consolidation services are free

Denzel's experience is neither a rare nor isolated incident. As more students resort to borrowing to finance their educations, the number of companies specializing in loan repayment assistance rises – and they charge hefty fees for services that lenders and loan servicers provide for free.

If you want to consolidate your federal student loans, enroll in a specific repayment plan, or change repayment plans, you can do any and all of these without paying a dime. It is your federal student loan servicer's job to help you find a repayment plan that works for you and sign you up.

If you would like to consolidate federal loans, the best place to do so is through the website. The free electronic application process does not require any processing, administrative, or consolidation fees – unlike many predatory loan consolidation companies.

How to spot a scam and avoid falling victim

It is easy, however, to fall prey to a shady consolidation company because of their aggressive sales pitches.

To get their foot in the door, many companies charade under legitimate and official sounding names that lead borrowers to believe they are reputable. Most companies have variations of the phrases "student aid" or "federal service" in their titles or logos – leading people to believe they are associated with the U.S. government or federal student loan servicers. Some even have seals that mildly resemble the official U.S. Department of Education seal.

Here are some signs that may act as red flags should one of these companies contact you.

  • An upfront fee for processing or reviewing your loans is requested, or an administrative fee is incurred
  • A monthly fee for processing your paperwork or payments is requested
  • The company requires that you sign over power of attorney to them
  • Slick-sounding representatives promise your loan can and will be forgiven if you work with them
  • Emails or postal mailings that make too-good-to-be-true claims about lowering your monthly payments or eliminating them altogether
  • Claims that the company will negotiate on your behalf with your lender to lower interest rates (Federal student loan rates are non-negotiable.)
  • High-pressure sales tactics such as urging you to act quickly so you don't miss out on special consolidation deals or avoid interest rate increases

3 steps to take if you are solicited

What should you do if you come across a company offering assistance?

1. Call your loan servicer.

If you are interested in working with a company that displays any of the above characteristics, be careful what information you share. Before signing any contracts or sending a single cent, call your loan servicer to compare your free options with them first.

Not sure who your loan servicer is? You can access information about your federal student loans through NSLDS, the National Student Loan Data System ( NSLDS is the U.S. Department of Education's central database for federal student loans and financial aid.

2. Check with the Better Business Bureau.

Research the company on the Better Business Bureau's website ( The BBB website is easy to use, does not require a log in, and could save you money, time and frustration.

For example, a quick search reveals that the company Denzel worked with has an F rating and is not BBB accredited. In the last three years, there have been 30 complaints against Strategic Student Loan Results, the majority of which cite problems surrounding the company's products and/or services.

3. Call Saint Leo.

You are also welcome to call Saint Leo University for questions about your federal student loan debt. You can call 813-226-4951 or 1-800-240-7658, option #4. Saint Leo borrowers can also send questions to Saint Leo is happy to help and encourages borrowers with concerns or questions to call.

Don't get fooled!

Remember, you can consolidate your federal student loans, as well as choose and change repayment plans, for free. When in doubt, always call your loan servicer; they will work with you and never charge you for help.

With the right repayment plan, managing your student loan debt can be uncomplicated and cost effective.

*The borrower's name has been changed to protect his privacy.
** The name of the company has been changed.

Have you been solicited by a suspicious loan consolidation company?

A Certified Educator in Personal Finance®, Amanda Black is passionate about promoting financial literacy and helping student loan borrowers responsibly manage their debt. When she is not at work, Amanda enjoys jogging, sharing a glass of wine with friends, and traveling with her husband. You can reach her in the Financial Aid Office at 800.240.7658 or


Other posts you may be interested in reading:

How To Afford College As An Adult

Paying For College: A Scholarship Guide For Adult Learner

Get Financially Fit: 10 Tips For Students

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