How to avoid student loan fraud: 8 essential tips | Earnest | Earnest

How to avoid student loan fraud: 8 essential tips

By Authors at Earnest | Published on March 9, 2026

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If you have federal student loans, it’s important to be aware of student loan fraud schemes — and to make sure you don’t inadvertently commit fraud yourself. Here’s what you need to know to keep your identity, your access to higher education, and your finances safe.

What is student loan fraud?

Federal student loan fraud happens when someone abuses student aid or impersonates or scams a student using the guise of financial aid. Basically, it’s any fraud that involves student loans in some way — whether that’s misusing federal loans, even if it’s unintentional, or student loan scams where thieves conduct identity theft by impersonating representatives of loan servicers or the U.S. Department of Education.

Types of federal student loan fraud and how to avoid them

There are two main kinds of student loan fraud. The first kind of student loan fraud is fraud by students (or people pretending to be students) against the federal government. The second kind happens when fraudsters steal from students or families or scammers commit identity theft by gaining access to personal or financial information under false pretenses.

Student loan fraud by students

It’s possible for students to commit student loan fraud even without realizing it. Here’s what you need to stay on top of.

1. Make sure your FAFSA information is accurate

The main way student borrowers commit loan fraud is by sharing incorrect information on the FAFSA (Free Application for Federal Student Aid). This could be understating family income to qualify for more aid, lying about having a high school diploma, or lying about your marital status. Whether you mean to do this doesn’t really matter — you could still be flagged for fraud even if you make an honest mistake. Always take your time and double-check your information.

The FAFSA has undergone significant changes, including a simplified application process and adjustments to how income is assessed. This may impact students' responses and potential risks of making mistakes on the FAFSA.

Not sure if your information is accurate? The official FAFSA website has a help section that provides guidance on how to fill out the application accurately.

Or, if students realize they've made a mistake on their submitted FAFSA, they can log in to their account at https://studentaid.gov and select "Make a Correction" to update their information. After submitting the corrections, they should monitor their email and FAFSA status for updates, and contact their school's financial aid office for further assistance if needed.

2. Use your student loan funds for their intended purpose

Student loans are for funding your education, so there are restrictions about how you can use the money. For example, you can use it for living expenses, tuition, and visa fees if you’re studying abroad. You can’t use it for starting a business or buying a home.

Many undergraduate students only borrow Direct Loans, which are transferred directly to the university. However, if you need additional funding for living expenses, you may be able to get a cash disbursement. Keep a record of how you’re spending your loan money so that you can easily answer your loan servicer if they ever ask.

3. Be aware of international study restrictions

If you’re borrowing federal funds to study abroad, your school may have restrictions on how many classes you’re allowed to miss, or when you’re allowed to return to the United States during the academic year. Returning home for any reason when you’re not allowed to could invalidate your loans.

Make sure you read these agreements thoroughly and find out how to get authorization for emergency travel home. It may be as simple as emailing a program director to let them know what’s happening, or you may have to complete some paperwork.

4. Don’t be afraid to ask questions

If you have any questions about how to fill out the FAFSA or how to use your loans, StudentAid.gov has a wealth of information. You can also contact customer service reps via phone call, email, or online chat. It’s always better to ask and be safe than to have to fix a messy situation later on.

How do I dispute student loan fraud?

If you’ve been accused of student loan fraud — and if the accusation is from a legitimate federal office — you should start by contacting the Department of Education. It’s entirely possible that someone has made a mistake and you’ve been flagged incorrectly, or that you made a mistake on a form.

If customer service options fail to solve the issue, you can contact the FSA Ombudsman Office, which addresses federal loan-related disputes. Depending on how serious the fraud charges are, and the potential consequences, if the case progresses you may also want to look into hiring a lawyer.

Student loan fraud by scammers

Scammers purporting to be debt relief companies or financial aid counselors often prey upon student borrowers.

Here are some ways to stay vigilant.

1. Protect your data

Always watch for warning signs that could indicate someone is trying to scam you. You will never have to provide a credit card number to qualify for student loan forgiveness or cancellation, for example. Keep your account secure and never share your FSA ID or password — what you use to log in to the FAFSA — with anyone else.

2. Be wary of unsolicited callers

If you get an unsolicited phone call or text message about your loans, that should be a red flag. Before proceeding, ask the caller for their phone number and say you’ll give them a call back. If you Google the number and it’s not clearly associated with the Department of Education, your private student loan lender, or your student loan servicer, take note of the number so you can report it. Never give away your sensitive information such as your username, FSA ID, or password to someone you don’t know.

No federal student loan servicer will ever ask you to sign over your power of attorney. If someone has asked you to do this and you have signed that paperwork, reach out to your loan servicer as soon as possible to revoke that permission.

3. Never give out your credit card number or bank details

It’s important to remember that government agencies will never ask you to pay for advice or charge you application fees for the FAFSA, loan forgiveness programs, loan consolidation, changing your repayment plan, or accessing any other services they offer.

While federal student loans do usually have fees, these are generally assessed by deducting them from your first disbursement — you should never have to pay for upfront fees by other methods.

4. Document everything

If you get phone calls, texts, letters, or emails about your loans that seem suspicious, document them as evidence in case you need to report them. If you’re concerned something might be wrong with your account, always try contacting your servicer directly to find out if everything is ok before replying directly to communications that seem fishy.

5. Double-check any offers

If someone offers to help you get forgiveness or manage repayments for a fee, it’s likely a scam. The Department of Education and loan servicers won’t charge for these services.

6. Confirm payment details

Scammers may send fake billing statements or ask for updated banking details. Always log into your servicer’s official website to verify your loan information.

7. Be skeptical of urgency

Scammers often create false urgency, insisting that you must act quickly or face penalties. Take your time and contact your loan servicer directly if you're unsure about any communication.

8. Be cautious regarding student loan news

The Department of Education has reported recently that fraudsters have been using President Biden’s student loan debt relief plan as a way to scam and steal from students and commit identity theft. And after the long pause on federal student loan payments due to the pandemic, repayments resumed in 2023, creating new opportunities for crime.

Scammers are taking advantage of these transition periods by targeting borrowers who may be unaware of the updated terms or repayment options. Common schemes include pretending to offer expedited forgiveness, pushing fake "relief programs," or promising to stop garnishments for a fee.

Also, you should never pay a third party to complete the FAFSA for you. Aidan, the Federal Student Association’s new AI assistant, instead for a free and safe solution.

How do I report federal student loan fraud?

If you believe you’ve been the victim of student loan fraud, you can report your case to a number of federal and state offices, depending on what kind of fraud it is. You can report scammers to the Attorney General; to the Consumer Financial Protection Bureau (CFPB); and to the Federal Trade Commission (FTC).

If you think your student loan account has been compromised, you should change your password immediately and contact your loan servicer.

Is there such a thing as private student loan fraud?

Yes. Private student loan fraud occurs when a student defrauds a private lender, or when a scammer tries to pose as a lender, or the student, to defraud the other parties involved. A few examples of private student loan fraud:

Though less common than federal student loan fraud, it can also have severe legal and financial consequences. If you think you’ve been a victim of private student loan fraud, file a complaint with the FTC. If your identity has been stolen, there are other steps you should take as well.

Learn more about Earnest private student loans

At Earnest, we're committed to not only helping you manage your loans but also educating you about every aspect of student loans—whether it's refinancing, repayment options, or protecting yourself from fraud.

If you ever have questions about student loan fraud or want to learn more about your student loan options¹, our team is here to assist. You can also visit trusted resources like StudentAid.gov or the Federal Trade Commission (FTC) for more information.

AE
About the Author

Authors at Earnest

We are a skilled team of design, math, finance, and technology geeks who noticed a lack of trust in the financial system and decided to do something about it. We also like to write articles to help clients with any financial challenge they may face.

Disclaimer

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

1 Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grants, and work-study opportunities. 2) Next, fill out a FAFSA(R) form to apply for federal student loans. Federal Direct subsidized and unsubsidized loans, excluding PLUS Loan for Parents and PLUS Loan for Graduate and Professional Students which require a credit check and a credit worthy endorser if the parent or graduate or professional student has adverse credit, do not require a credit check or cosigner, and offer various protections if you're struggling with your payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at https://studentaid.gov/.