With the cost of education rising, the demand for loans has also risen. But this has also led to a rise in number of cases of fraudsters targeting students desperate for education loans
Once one has secured admission for higher studies, whether in India or abroad, the next most important task is arranging funds for the same, as some of these courses are often beyond the reach of the average salaried class. Education loans prove to be a boon for such students.
But now, scammers have begun targeting these students who are otherwise desperately looking to arrange money for their higher studies before the cut-off date for admission. They often prey on the students’ sense of urgency and entrap them into paying money on the pretext of guaranteeing loans or grants or scholarships.
In the case of loan fraud, fraudsters typically ask for some sort of upfront payment for quick approval of loans, promising minimal paperwork, or discounts or loans, or favourable rates of interest on the loans. Once the student deposits the money, the fraudsters disappear.
Some Common Education Loan Scams
Here are some common education loan scams that students need to be aware of.
1] Advance Fee For Loan: One of the most prevalent scam is where someone demands upfront fee for disbursal of the loan. The loan provider may come across as genuine, offering a relatively higher loan amount at a competitive interest rate. But the catch is that they would ask for an advance payment for the approval of the loan.
Any such demand should be rejected outright. It is a fraud. Scammers often use this technique to lure students who are desperate and in dire need of a loan. Always remember, no loan provider will ever ask for any upfront fee for disbursal of loan.
2] Guaranteed Approval: Do not fall for any plan that offers guaranteed approval of loan. Loans are always disbursed after a thorough credit history check that also includes a check of the borrower’s repaying capacity. Any genuine lender, such as a bank or a non-banking financial company will scrutinise the genuineness of your admission details, including the reputation and ranking of the course and the academic institution, your family’s credit history, financial situation, your own academic records, information of past and current academic institution, and your repayment capacity. They might also run a check on your police records if they suspect anything suspicious. Any promise that overlooks these basic criteria and promises guaranteed approval is a scam.
3] Debt Elimination: Sometimes one might get a call from a loan vendor saying if you apply for their program, they will get rid of all your education loan debt in exchange of a nominal fee. Do not entertain such calls as it is a clear sign of fraud. In no way is it possible to clear one’s debt unless there is an unanticipated incident, such as the demise of the borrower. Only the original lender of the loan (the bank or the financial institution which has disbursed the loan) has the authority to write off the loan.
4] Scholarship Scam: In these cases, scammers lure students with offers of scholarships along with the loan, all for payment of a fee. They might also ask you to pay to get access to exclusive funds or awards etc.
There are various types of scholarships and loans for meritorious students, both from the government, private entities, corporate houses and philanthropists, and they won’t ask you to pay any advance fees to enrol yourself. These awards and grants are always merit-based.
5] Loan Forgiveness: Scammers also target students who have secured loans and are enrolled in study. They usually pose as someone from the lending institution which has disbursed you the loan and claim that the bank is considering you as an eligible candidate for a new loan forgiveness program. You just have to pay a small fee to avail of the offer. They might even rattle off details of your loan, such as your bank account, loan amount, account balance and so on to gain your trust and urge to consider their offer as it is a limited period offer. This is also a scam.
So, here are a few common scams targeting students seeking education loans. Always treat any of these offers with a hint of caution. It is important to not get overwhelmed by these offers and end up losing money.