Looking for Student Loans? How to Spot 5 Common Scams

Looking for Student Loans? How to Spot 5 Common Scams

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Looking for Student Loans? How to Spot 5 Common Scams

Every parent’s deepest dream is to give their children the best education possible, understanding that education not only incorporates discipline but also shapes their child’s future. It’s this belief that pushes parents to invest in their child’s schooling, from their first day at school up to their college graduation. Parents hold the conviction that a firm education, enriched with knowledge, is essential for their child’s growth. For parents, education is more than just learning! It’s the foundation upon which they can build a stronger, skilled child who can survive the fast-paced society.

In this pursuit, you and your families seek financial assistance through student loans. Student loans make higher education accessible to a wider population. A student loan is a type of financial aid designed to help you pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses. It differs from other types of loans in which the interest rate may be lower and the repayment schedule may be deferred. 

When seeking financial assistance for education, it’s crucial to navigate the process with caution, as the search for student loans can often lead you and your family into the crosshairs of scammers. However, this path is filled with risks because scammers are always searching for people they can trick. These scammers take advantage of those who need money, so you need to know how to spot and avoid these scams. Before we dive into the common student loan scams, let’s first look at why you would require a student loan.

When Do You Need a Student Loan?

1. High Tuition Fees

The primary reason for seeking a student loan is to cover your high tuition fees. Higher education, especially in reputed institutions or for courses like medicine, engineering, and management, can be quite expensive. Student loans enable you to pursue your desired courses without the financial burden being an immediate barrier.

2. Living Expenses

Apart from tuition fees, living expenses such as accommodation, food, transportation, and textbooks can significantly add up. For studying away from home or in another country, these costs can be substantial. Student loans often cover these living expenses, allowing you to focus on your studies without worrying about financial constraints.

3. Access to Quality Education

Student loans provide an opportunity for you to access quality education that might otherwise be out of reach due to financial limitations. This access can lead to better career opportunities, higher earning potential, and personal growth.

4. Investment in the Future

Education is viewed as an investment in one’s future. Taking out a student loan is often seen as investing in oneself, with the expectation that the degree or qualifications earned will lead to a career that not only allows for the repayment of the loan but also secures financial stability.

5. Bridging the Financial Gap

Even with savings, scholarships, or grants, there might still be a financial gap that needs to be covered to afford higher education. Student loans can bridge this gap, ensuring that financial hurdles do not prevent you from pursuing your academic and career goals.

6. Building Credit History

Taking out a student loan and repaying it responsibly can be an early opportunity to build a credit history. A good credit history can be beneficial in the future for other financial endeavors, such as securing a mortgage or car loan.

7. Flexibility and Repayment Options

Student loans often come with flexible repayment options, including deferred payments until after graduation, income-driven repayment plans, and sometimes, forgiveness programs. These options can make the prospect of taking out a loan more manageable and less intimidating.

5 Common Student Loan Scams

1. Upfront Fee Scams

A common scam involves fraudsters asking for an upfront fee to process the loan application or guarantee approval. They might claim that this fee covers administrative costs, and processing fees, or secure lower interest rates. However, legitimate financial institutions and banks in India do not require any upfront payment to consider or approve a student loan. If you’re asked to pay any fee before your loan is sanctioned, it’s a red flag indicating a scam.

2. Guaranteed Loan Approval Offers

Be cautious of entities that guarantee loan approval irrespective of your credit history or financial situation. Authentic lenders, including banks and NBFCs (Non-Banking Financial Companies) in India, conduct thorough evaluations based on credit scores, academic records, the financial status of the guarantor, and the college or university’s reputation before approving a student loan. Offers that bypass these checks and guarantee approval are often scams aiming to lure individuals into fraudulent schemes.

3. Phishing Scams

Phishing attempts are particularly insidious as they aim to steal personal and financial information under the guise of offering student loans. You might receive emails, SMS, or phone calls from individuals claiming to represent reputable banks or financial institutions, asking for sensitive details such as your Aadhaar number, PAN card information, bank account details, or passwords. Remember, legitimate organizations will never ask for such information through unsolicited communications. Always verify the authenticity of the request by contacting the institution directly through official channels.

4. Scholarship and Grant Scams

In this type of scam, fraudsters promise scholarships or grants in exchange for a fee. They might claim to have exclusive access to funds or scholarships that require payment to unlock. It’s important to note that genuine scholarships and grants, offered by both government and private institutions in India, do not require any payment from the applicant. Research thoroughly and rely on official and reputable sources for scholarship information.

5. Loan Consolidation and Debt Relief Scams

Some scammers target students who are already struggling with student loan debt, offering debt relief, loan consolidation, or loan forgiveness programs for an upfront fee or personal information. In India, while there are legitimate ways to manage student loan debt, such as restructuring or negotiating with the lender, services that require payment for debt relief or forgiveness are typically fraudulent. The Reserve Bank of India (RBI) and other regulatory bodies do not endorse any such fee-charging debt relief services for student loans.

Student loan scheme by RBI

The Reserve Bank of India states that the Educational Loan Scheme is designed to offer financial assistance through banks to qualified and deserving students who wish to pursue higher education in India and abroad. The primary goal is to ensure that every capable student, regardless of their financial situation, has the chance to further their education with the support of the banking system under favorable terms and conditions. The scheme guarantees that no worthy student misses out on higher education due to a lack of financial resources. In essence, it aims to provide affordable financial aid to both needy students for basic education and outstanding students for higher, professional, or technical education(RBI 2005).


To safeguard against student loan scams in India, take the following precautions:

  • Always approach reputable and recognized banks or NBFCs for student loans.
  • Do not pay any upfront fees without verifying the legitimacy of the charge.
  • Be skeptical of guaranteed loan approvals, especially if they do not require a thorough check of your credentials.
  • Protect your personal and financial information; do not share it based on unsolicited requests.
  • Research scholarships and grants through official government or educational institution websites.
  • If you encounter a scam, report it to the nearest police station or cyber crime cell, and inform the RBI or other relevant regulatory authorities.


Navigating the process of securing a student loan requires vigilance and an informed approach. By staying informed and cautious, you can safely navigate the process of securing financial aid for your education without falling victim to scams. Remember, legitimate lenders and assistance programs are there to help you achieve your educational goals, not to exploit your financial situation.