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There are several legitimate programs that federal student loan borrowers can utilize to have their federal student loans forgiven. Unfortunately, there are also student loan forgiveness program scams. Confusion surrounding loan forgiveness can create space for scammers to thrive. Most commonly, companies will promise something that cannot be done, or charge an upfront fee for something that can be done online for free.

The real trick for borrowers will be distinguishing between a company that is providing student loan counseling in a fair and legitimate way from a company that is trying to take advantage of unsuspecting students.

Is Student Loan Forgiveness a Scam?

There are millions of students paying college student loans and the idea of having those student loans forgiven can be very appealing. There are legitimate student loan forgiveness programs that are available to federal student loan borrowers who meet the program requirements.

These include programs like Public Services Loan Forgiveness or the Teacher Loan Forgiveness Program. There may be other options for forgiving student loans, depending on your background and program requirements.

What Is a Student Loan Forgiveness Scam?

A student loan forgiveness scam is when a service makes a promise that they cannot deliver on. For borrowers looking to get out of student loan debt quickly, these promises can seem promising. Unfortunately, scams may offer impossible promises like immediate loan forgiveness or may trick student loan borrowers into disclosing personal information.

Types of Student Loan Scams

Student loan scams can take many forms. Be wary of scams that come in the form of unsolicited calls, texts, or emails.

Student Loan Forgiveness Scam Calls

If you receive an unsolicited call asking you for information about your student loans, pay close attention. Some calls may present opportunities to cancel student loan debt. In general, any call offering a fast solution to pay off your student loans is a scam. The U.S. Department of Education offers legitimate forgiveness programs and opportunities to lower your student loan payments, all of which can be accessed at no cost to borrowers directly through their loan servicers.

The Federal Trade Commission (FTC) has a sample of what these calls might sound like, so you can be prepared.

Student Loan Forgiveness Text Scam

Texting is another avenue for scammers to contact student loan borrowers. These communications might include the need to “act immediately” or tout enrollment for debt relief is taking place on a first-come first-served in order to inspire a false sense of urgency.

Text scams are newer on the scamming spectrum, so consumers may not be expecting them. Instead of responding to the message, call your student loan servicer on the number listed on their website. In general, most student loan servicers will not conduct business via text messages.

Spotting Student Loan Scams

When it comes to student loan scams, the short rule of thumb is that anything that sounds too good to be true, probably is. For example, if a company claims that with an up-front fee that your loans will automatically be forgiven, it is a scam. No program exists where loans are “automatically” forgiven for a fee.

If you have a feeling that you might be getting scammed, do a thorough internet search for the company. More than likely, someone else has been in contact with, and possibly taken advantage of by, this company.

The problem with relying on an internet search to look for a scam? Not every scam will have been identified through an internet search, as they change their names and phone numbers often to avoid the background research a consumer might conduct. Here are a few common techniques used by student loan scammers.

Upfront Cost & Fees

Any student loan company offering to help you for an upfront fee is a scam. According to the FTC, it is illegal for companies to charge you before providing assistance. And importantly, borrowers can get help directly from their student loan servicer or Department of Education at no cost.

Immediate Student Loan Forgiveness

Another huge red flag — organizations offering to provide immediate or complete student loan forgiveness. Most government loan forgiveness programs require a record of qualifying payments and or employment certifications depending on the program.

Requesting Passwords

Broadly speaking, legitimate companies won’t ask you to verify personal details out of the blue. If you receive a call, email, or text asking you to disclose your passwords or any other sensitive personal information, think twice before responding. Sharing personal details could allow scammers to access your loan information, or other important accounts.

Avoiding Student Loan Scams

Attention to detail and diligence in communication can help you avoid some common student loan scams. Here are eight student loan scams to avoid.

1. A Promise of Immediate Forgiveness

Beware of any promise that seems too good to be true. Student loan forgiveness takes time, period. A company can only help you fill out paperwork for a forgiveness program; they cannot forgive your loans.

2. A Request for an Upfront Fee

Many scams rely on obtaining an upfront fee for something that either cannot be done (immediate loan forgiveness) or something that can be done for free, online (apply for a loan forgiveness program). You should only agree to payment once the company has completed the service in question.

3. Private Loan Refinancing

In general, only federal loans are eligible for loan forgiveness programs. Be cautious of any company that tells you that they can get your private loans forgiven. Private loans don’t typically offer forgiveness programs.

4. A Phone Call

Many scams start with a student loan forgiveness call. The Department of Education, who directs federal loan forgiveness programs, will never call you. If they need to correspond with you, they will by mail.

5. A Request to Pay Them and Not Your Lender

No company will ever make your student loan payments for you. You can pay them for a service, sure. But it is unwise to make your student loan payments to anyone except for who you owe.

6. A Request to Stop Making Student Loan Payments

No legit company will ever recommend you stop making your loan payments. A company working in your best interest will advise you to make all of your payments on the correct repayment plan so that you’re sure to qualify for any applicable loan forgiveness programs.

7. Asking for Your FSA ID

No one should ever ask for your Federal Student Aid ID. Your FSA ID allows you to log onto the government website where borrowers manage their federal student loans.

8. Official-Looking Insignias

Fraudsters do a good job of making their websites, seals, and paperwork look like official government branding. Just because something looks official does not mean it is official, so do your research.

Reporting Student Loan Scams

If you encounter any student loan scams, you can have a few different options for reporting them. You can report scams to the Department of Education through the Federal Student Aid website .

You can also report the business conducting the student loan scam to the Consumer Financial Protection Bureau . Anyone who has been contacted by what they believe to be a scam can also report it to the
FTC .

Looking for Safe Private Student Loans?

Not everyone qualifies for loan forgiveness. Others may not actually find that it makes the most sense for their own personal financial situation. (This may be especially true for loan forgiveness programs that require you to pay taxes on the forgiven balance, such as income-driven repayment.)

Those looking for a safe borrowing option may want to consider SoFi. Private student loans from SoFi have no fees and are available to undergraduate, graduate, and professional students, or their parents.

The Takeaway

Student loan scams rely on the borrower’s lack of understanding on how their loans, and loan forgiveness program works. Pay attention to texts, emails, or phone calls that over-promise on their ability to lower your monthly payments or have loans forgiven, as these are generally indicators that there is a scam, or other unfavorable business going on. If you have any doubt, contact your loan servicer directly to avoid falling into a scammer’s trap.

No matter what path you take with your student loans, always be sure to do adequate research. It’s hard to scam someone that understands their loans, and their options for repaying them.

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SoFi Private Student Loans
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In options trading, Delta is an important assessment tool used to measure risk sensitivity. Delta is a risk metric that compares changes in a derivative’s underlying asset price to the change in the price of the derivative itself.

Essentially it measures the sensitivity of a derivative’s price to a change in the underlying asset. Using Delta as part of an options assessment can help investors make better trades.

Delta is one of “the Greeks,” a set of options trading tools denoted by Greek letters. Some traders might refer to the Greeks as risk sensitivities, risk measures,or hedge parameters. The Delta metric is the most commonly used Greek.

Recommended: A Beginner’s Guide to Options Trading

Option Delta Formula

Analysts calculate Delta using the following formula with theoretical pricing models:

Δ = ∂V / ∂S

Where:

•   ∂ = the first derivative

•   V = the option’s price (theoretical value)

•   S = the underlying asset’s price

Some analysts may calculate Delta with the much more complex Black-Sholes model that incorporates additional factors. But traders generally don’t calculate the formula themselves, as trading software and exchanges do it automatically. Traders analyze these calculations to look for investment opportunities.

Option Delta Example

For each $1 that an underlying stock moves, an the equity derivative’s price changes by the Delta amount. Investors express the Delta sensitivity metric in basis points. For example, let’s say there is a long call option with a delta of 0.40. Investors would refer to this as “40 delta.” If the option’s underlying asset increased in price by $1.00, the option price would increase by $0.40.

However, the Delta amount is always changing, so the option price won’t always move by the same amount in relation to the underlying asset price. Various factors impact Delta, including asset volatility, asset price, and time until expiration.

If the price of the underlying asset increases, the Delta gets closer to 1.0 and a call option increases in value. Conversely, a put option becomes more valuable if the asset price goes lower than the strike price, and in this case Delta is negative.

How to Interpret Delta

Delta is a ratio that compares changes in the price of derivatives and their underlying assets. It uses theoretical price movements to track what will happen with changes in asset and option price. The direction of price movements will determine whether the ratio is positive or negative.

Bullish options strategies have a positive Delta, and bearish strategies have a negative Delta. It’s important to remember that unlike stocks, options buying and selling options does not indicate a bullish or bearish strategy. Sometimes buying a put option is a bearish strategy, and vice versa.

Recommended: Differences Between Options and Stocks

Traders use the Delta to gain an understanding of whether an option will expire in the money or not. The more an option is in the money, the further the Delta value will deviate from 0, towards either 1 or -1.

The more an option goes out of the money, the closer the Delta value gets to 0. Higher Delta means higher sensitivity. An option with a 0.9 Delta, for example, will change more if the underlying asset price changes than an option with a 0.10 Delta. If an option is at the money, the underlying asset price is the same as the strike price, so there is a 50% chance that the option will expire in the money or out of the money.

Call Options

For call options, delta is positive if the derivative’s underlying asset increases in price. Delta’s value in points ranges from 0 to 1. When a call option is at the money the Delta is near 0.50, meaning it has an equal likelihood of increasing or decreasing before the expiration date.

Put Options

For put options, if the underlying asset increases in price then delta is negative. Delta’s value in points ranges from 0 to -1. When a put option is at the money the Delta is near -0.50.

How Traders Use Delta

In addition to assessing option sensitivity, traders look to Delta as a probability that an option will end up in or out of the money. The more likely an option is to generate a profit, the less risky it is as an investment.

Every investor has their own risk tolerance, so some might be more willing to take on a risky investment if it has a greater potential reward. When considering Delta, traders recognize that the closer it is to 1 or -1 to greater exposure they have to the underlying asset.

If a long call has a Delta of 0.40, it essentially has a 40% chance of expiring in the money. So if a long call option has a strike price of $30, the owner has the right to buy the stock for $30 before the expiration date. There is a 40% chance that the stock’s price will increase to at least $30 before the option contract expires.

Traders also use Delta to put together options spread strategies.

Delta Neutral

Traders also use Delta to hedge against risk. One common options trading strategy, known as neutral Delta, is to hold several options with a collective Delta near 0.

The strategy reduces the risk of the overall portfolio of options. If the underlying asset price moves, it will have a smaller impact on the total portfolio of options than if a trader only held one or two options.

One example of this is a calendar spread strategy, in which traders use options with various expiration dates in order to get to Delta neutral.

Delta Spread

With a Delta spread strategy, traders buy and sell various options to create a portfolio that offsets so the overall Delta is near zero. With this strategy the trader hopes to make a small profit off of some of the options in the portfolio.

Using Delta Along With the other Greeks

Delta measures an option’s directional exposure. It is just one of the Greek measurement tools that traders use to assess options. There are five Greeks that work together to give traders a comprehensive understanding of an option. The Greeks are:

•   Delta (Δ): Measures the sensitivity between an option price and the price of the underlying security.

•   Gamma (Γ): Measures the rate at which Delta is changing.

•   Theta (θ): Measures the time decay of an option. Options become less valuable as the expiration date gets closer.

•   Vega (υ): Measures how much implied volatility affects an option’s value. The more volatility there is the higher an option premium becomes.

•   Rho (ρ): Measures an option’s sensitivity to changing interest rates.

The Takeaway

Delta is a useful metric for traders evaluating options and can help investors determine their options strategy. Traders often combine it with other tools and ratios during technical analysis. However, you don’t need to trade options in order to get started investing.

If you’re looking to begin options trading, a great way to start is with a user-friendly platform like SoFi’s. Thanks to its intuitive and approachable design, SoFi’s platform allows you to trade options through the mobile app or the web platform. Plus, you’ll have access to educational resources about options so you can learn more.

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