Scam-o-Meter: Scammers are cashing in on student loan confusion

Key insights

The data on student loan and financial aid scams may come as a shock.

• One operation alone collected $8.8 million from borrowers. In April 2026, the FTC halted a scheme whose operators posed as the U.S. Department of Education or official loan servicers and promised loan forgiveness in exchange for upfront fees as high as $1,400. No loans were ever forgiven.
• Criminals count on confusion. The financial aid system is complex, and scammers use that to their advantage — cold-calling borrowers and presenting themselves as government officials who can “help.”
• Stolen identities fuel student aid fraud. Criminals posing as other people on the Free Applications for Federal Student Aid (FAFSA) pocketed $40 million in Direct Loans and $6 million in Pell Grants before getting caught. Some even exploited deceased people’s identities to claim over $30 million in payments.
• Oversight gaps drain millions in taxpayer funds. The Department of Education found that it disbursed nearly $90 million to ineligible recipients over three years — including the identity theft detailed, improper loans, and other erroneous payments.
• The damage lands on real people. Borrowers who pay fake “debt relief” fees lose money they already can’t spare, while fraudulent aid payments misuse taxpayer funds meant for real students.
• Upfront fees are the biggest red flag. Legitimate help with federal student loans is free —  charging an advance fee for loan forgiveness or relief is breaking the law.

Real loan forgiveness never comes with a price tag — and it never arrives by cold call.

What our expert says

Tomas Sinicki, managing director at Coveron, shares his advice on avoiding student loan scams:

• Never pay an upfront fee for help with federal student loans — real assistance is free.
• Share your personal information only through official .gov websites.
• Never hand over your Federal Student Aid (FSA) ID to “debt relief” companies.
• Check your credit report regularly to spot unauthorized loans early.
• Use an identity theft protection service that includes credit monitoring, financial account monitoring, and online fraud insurance.

A few minutes of caution now can protect your financial future.

Methodology and sources

The findings come from the Federal Trade Commission’s April 2026 announcement opens in a new tab regarding a student loan debt relief scheme, and the U.S. Department of Education’s May 2025 announcement opens in a new tab on combating fraud in federal student aid programs.

What is Scam-o-Meter?

Scam-o-Meter is an ongoing Coveron series where we keep track of online fraud. In each installment, we look at different scam or fraud trends, break down how they work, and share practical tips on how to protect yourself. We also share the latest data from official sources — like the FTC and the U.S. Department of Education.