Have you ever thought about winning the lottery to pay off student loan debt? If so, you might be unaware that there are contests and promotions specifically designed for student loan borrowers.
While you don’t want to make it your repayment strategy and the odds are not in your favor, it can’t hurt to try your luck occasionally if you are certain that an opportunity is legitimate.
For example, a video contest sponsored by the beer brand Natural Light in 2018 and advertised during the Super Bowl awarded $40,000 each to 25 winners to help them pay off student loans.
Other student loan contests and promotions can be easily found via an internet search. First Aid Beauty’s FAB AID contest, for example, gives graduates of an accredited postsecondary program between January 2011 and August 2021 a chance through July 15 to win up to $100,000 to pay off student loan debt. The promotion will award $1 million in 2021, roughly the same total paid out to 24 winners last year.
Unfortunately, with student loan debt on the rise — Federal Reserve statistics updated in February indicate that the amount owed in federal and private student loans had grown to more than $1.7 trillion in the fourth quarter of 2020 — an increasing number of scam companies are looking to make money by taking advantage of borrowers. That means borrowers should be hypervigilant about ensuring their private information is protected and secure, and skeptical of any entity promising to help with student loan debt.
So how can you try out this unconventional way of paying off student loan debt without getting into trouble? Do your research before applying. Some contests are run by companies and brands that are household names, but others might be harder to evaluate.
Here are three things to watch out for when evaluating an opportunity to win money to help pay off your student loans:
— Pay to play.
— Request for secure information.
— You don’t remember entering.
Pay to Play
If you have to pay to enter a student loan contest or promotion, that is a major red flag that something is suspect. By law, legitimate contest and promotion sweepstakes that give prizes away by chance have to be free — hence the phrase “no purchase necessary.”
That doesn’t mean a company can’t get something in exchange for your entry. Often, student loan contests and promotions are used as a form of advertising or a way to collect contact information or gain followers on social media in exchange for a chance to win.
For example, in the First Aid Beauty contest, entrants must submit a video and follow the company on Instagram in addition to providing some basic personal information.
In these cases, it’s OK to participate if you are familiar with the company and accept the terms of the contest.
[Read: How to Pay Off Student Loans.]
However, it’s illegal for any entity to require any form of payment or purchase to enter a sweepstakes, so this should be an immediate indicator of a scam. In fact, if you believe a contest has violated this rule, you should file a complaint with the Federal Trade Commission, a regulatory body created to protect consumers.
Request for Secure Information
In general, if you receive a request for detailed information about your student loans or other secure information like your Federal Student Aid identification number, or FSA ID, the opportunity is suspect. Scammers use a variety of tactics to gain access to your student loan accounts, including impersonating federal agencies and student loan servicers, so look carefully at your mail and email for signs that a communication is suspect.
Federal Student Aid offers a variety of options to help you manage student loan repayment, but does not run contests or promotions to help you pay off student debt.
An exception to providing personal information to enter a contest or promotion is when you can give general information. For example, a research firm could request your approximate total amount of student loan debt as part of a survey in exchange for an entry into a contest.
You Don’t Remember Entering
It’s common for scammers to make you think you have already won a prize to get your attention and lure you into providing information. For example, they may say that to claim your prize, you need to pay a “disbursement” or “redemption” fee.
Or the scammer may send a check but require you to send back a check for the taxes or some other fees. Some of these scams are quite convincing, and many people have fallen prey to them.
That said, there are opportunities to enter legitimate contests that could pay off big time. If you plan to take part in any of them, or in any student loan-related promotion, just make sure you understand the terms and conditions as well as any tax implications.
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Student Loan Contests and Promotions: What to Know originally appeared on usnews.com