With the trillion dollar student loan debt in the USA today it is understandable when students are looking for a quick solution to their debt problem.

Student loan consolidation is one of the debt repayment solutions that students often opt for in lieu of the limited term payments they have to make for the student loan.

Student loan consolidation entails withdrawing a larger long term loan in order to pay off the previous loan. The new loan usually is for a longer term with smaller more flexible payments.

Ultimately however the applicant may end up paying much more than the original amount in the long run.

Student Loan Consolidation Scams

There have been many instances where students have been promised an easy respite from the looming stress of the student loan. Many unsuspecting people fall prey to these scams when they’re looking for an easy solution for their student debt problems.

The typical student loan consolidation scams ask for payment upfront without paying off the previous loans. Laws dictate that any company cannot ask you for any advanced payment.

Another method of scamming students is to pose as a non-profit organization. These organizations are often found funneling money to organizations which work for profit.

The Repercussions

Being on the receiving end of a scam is an unenviable position and the manner in which the monetary damage affects the debt consolidation applicant can vary according to the scam.

Most individuals who fell prey to these scams were left with copious amounts of debt and higher interest rates. In fact they were even left with several penalties top their name as a result of non-payment to their original creditors which they deemed cleared.

Some more severe cases led to individuals being bankrupt at the end of the fraudulent scheme.

Detecting a Fraudulent Student Debt Consolidation Company

When trying to detect a potential debt consolidation scam keep an eye out for companies that are willing to make outrageous guarantees or are trying to force you into signing off on a plan without taking any specific needs into consideration.

In addition, you need to make sure that you have read and understood all the details written in fine print before signing off on a student debt consolidation scheme.

In order to keep effective communication flowing, remain in touch with your current creditors and ask them whether they are willing to work with the student debt consolidation company.

Before making payments to the debt consolidation company, wait for your previous creditors to confirm that all payments have been received.

It can be very tempting to go for a debt consolidation company that promises you an easy way out of your financial miseries. The worry and stress associated with student loans is what has led to many individuals falling prey to these debt consolidation scams. One thing that needs to be kept in mind is that in something sounds too good to be true, then it probably is.

Sources
http://www.wral.com/prepare-to-be-scammed-over-student-loan-help/12125383/
http://www.inquisitr.com/1148125/debt-consolidation-scams-to-avoid-regarding-student-loans/
http://money.howstuffworks.com/personal-finance/debt-management/debt-consolidation4.htm