Student loan scams are on the rise amid the confusion over debt relief. Here’s what to watch out for


LLooking to ease the burden of your student debt before federal payments resume in 2022? Make sure you do your due diligence, otherwise you might find yourself the victim of a student loan scam.

In recent months, consumer protection agencies in several states have warned residents to be on the lookout for growing reports of student loan scams. With daily headlines focusing on the state and the future of federal student loans – including recent announcements that hundreds of thousands of borrowers will have their debts wiped out – don’t feel alone if you don’t know if what you hear when offered help for your loans is legitimate.

Last August, the US Department of Education announced that more than 323,000 borrowers were eligible for loan forgiveness through the Total Permanent Disability (TPD) discharge. With the help of Social Security Administration data matching, these borrowers receive $ 5.8 billion in automatic student loan discharges.

Additionally, the Biden administration has kept its campaign promise to simplify and streamline the Public Student Loan Forgiveness Program (PSLF) – at least temporarily. In October, the Department of Education announced changes to help more than 550,000 borrowers working in the public sector automatically qualify for a discount faster by expanding what counts as an eligible payment.

More recently, White House press secretary Jen Psaki confirmed last week that federal student loan repayments, suspended since March 2020, would resume in February. As the pandemic-era forbearance period draws to a close, millions of borrowers may hear from their student loan officers for the first time in many months.

Add to that a plethora of (so far) broken promises from politicians regarding widespread student loan cancellation, and there will bound to be increased levels of confusion and panic among borrowers. According to Walter Suskind, deputy director of communications for the Student Borrower Protection Center, this creates “a perfect storm” for student loan fraudsters to strike.

In 2021 alone, the Federal Trade Commission sent millions of dollars in refunds to victims of student debt scams. But that’s just a drop in the bucket compared to the estimated $ 95 million that fraud victims paid in 2017 to a cluster of student loan scams.

With all the current disorganization, experts also expect increased levels of student loan fraud by 2022.

“Whenever there is a lot of news and activity related to student loans, scammers will take advantage of that news to try to scam people,” Suskind said.

Fortunately, student loan scams can be avoided if you know what to look for. Here are three warning signs to watch out for, along with some essential ways to protect your information:

1. They want your student loan IDs… and your social security number

One of the main reasons it’s getting harder and harder to tell if it’s a scam is that sophisticated phishing operations no longer actually charge people lump sums. Instead, they collect data that can help them create forged documents and defraud you for years to come.

“It will sound very legitimate,” said Todd Spodek, lawyer and managing partner of New York and Los Angeles-based Spodek Law Group. “But then they’ll say they need your personally identifiable information.”

Personally Identifiable Information (aka PII), according to Spodek, includes things like your driver’s license, Social Security number, credit card numbers, banking information, and even your Federal Student Aid (FSA) ID. In essence, PIIs are anything that can help prove a person’s identity – or allow a scammer to forge someone’s identity.

“Once they have a complete picture of your financial situation, they can use it to perpetuate larger fraud,” Spodek said.

2. They ask for advance payment

It is illegal for a student debt relief company to charge you a fee before a settlement or before providing a service. While some unique situations may require legal services or private financial advice, you still aren’t required to pay anyone for student debt help until the job is done. If someone asks you to pay a fee before you even start the process, they probably aren’t a legitimate supplier.

Also, while it’s perfectly legal to pay for help managing your repayment, as you would with other types of financial advice, you don’t. need pay to access federal programs. Borrowers can complete all required paperwork free of charge when applying for an income-based or federal consolidation plan. Even if you want to avoid the hassle, there are many organizations that can provide free assistance to borrowers. Suskind recommends that borrowers use the National Consumer Law Center’s state-by-state list of free legal resources specifically for student loan borrowers.

3. They advertise their services on social media or call you directly

Suppose you have serious financial problems and are looking for student debt relief, so you use Google to search for “student loan consolidation”. If you come across websites claiming to get you a consolidated loan with a considerably lower interest rate in exchange for a one-time fee, “that’s a red flag,” says Spodek. “No one should be advertising student loan consolidation. “

Savvy crooks will use digital advertising tools like Google AdWords and disguise themselves as legitimate websites that offer to take care of work that needs to be approved for consolidation in return for an upfront fee. Or the websites will make big promises of quick forgiveness or ultra-low interest rates. While some refinance options and debt counseling companies advertise their services to borrowers, legitimate federal consolidation and repayment plan options are still available for free.

Also, if you start getting harassed with phone calls after contacting a seemingly legitimate student loan aid company, or just simply searching for key terms in Google, it’s probably not a good idea to accept them. . As Suskind notes: “The federal government uses email and postal mail to contact borrowers. “

How to protect yourself from student loan scammers

First of all, if you are in dire financial straits, the first (and usually the only) place you should look is your student loan officer. For federal student loan borrowers, these are companies designated by the Department of Education to handle debt repayment, such as Nelnet or FedLoan. They can help you defer your payments or, ideally, set a lower monthly payment based on your income.

“Borrowers are entitled to income-based repayment plans,” Suskind said. “If you need help with affordable refunds, contact your maintenance agent and ask for help. “

For borrowers who expect full and permanent disability release or are in the process of having their student loan canceled through PSLF, it is especially important to verify with your service agent that the information you provide you have received are legitimate.

“If a borrower hears of a way to lower their monthly loan payments or get debt relief, they should verify that information with the federal government,” Suskind said.

Plus, another important way to protect yourself is to take the time to research and think through all of your potential options. Canceling, consolidating, and refinancing student loans doesn’t work the same way as selling a retailer one day only 50%; you are not going to lose a “good deal” just because you took a few days to confirm that what you are being offered is legitimate.

“Anytime someone asks you for personal information, you should immediately have a reason to pause and say, ‘Look, before I give you anything, I’m going to do some due diligence,’ says Spodek.

If you think you’ve been the victim of a student loan scam, or if you’ve been a victim in the past, be sure to report it to the FTC, as well as your state’s attorney general.

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