STUDENT LOAN SCAMS

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SCAMS BULLETIN Host Jay White is an inactive attorney in San Mateo County, California.

August 26, 2022

Student Loan Foregiveness Scams​

As of mid-2022, about 43 million people, including 8.9 million age 50 and older, had outstanding federal student loans, with the average debt burden topping $37,600, according to data from the U.S. Department of Education’s Federal Student Aid office (FSA).

At the same time, the student debt landscape is undergoing big changes. On Aug. 24, President Joe Biden announced a plan to forgive up to $20,000 in student debt for millions of borrowers. For those who still have outstanding loans, federal repayments are set to resume Dec. 31 after a nearly three-year pandemic moratorium. Many have new payment arrangements amid a reshuffle of student loan servicers (companies contracted by the government to manage repayments).

Scammers take advantage of circumstances like these. They barrage borrowers with robocalls, emails, texts and social media messages touting sketchy strategies to quickly reduce monthly payments or procure loan forgiveness.​

Some of these schemes involve sham debt relief companies of the kind that also target people in arrears on mortgages, credit cards or medical bills. Other scammers pose as student loan servicers or representatives of the U.S. Department of Education.

The common thread is that they will solicit an upfront payment or request personal information, like your FSA account credentials or Social Security number, supposedly to secure your freedom from student debt.

Dodgy debt relief companies​

There are legitimate companies and organizations that can help you navigate the complexities of the student loan system — for example, by sifting through myriad federal and state repayment and forgiveness programs to see if you qualify. Their tips and tools may save you time and money.

But remember that there’s nothing a debt relief company can do to reduce or restructure your student debt that you can’t do yourself, for free, by contacting your loan servicer or the Department of Education.

Student debt scammers claim special skills to get you a more affordable repayment plan or “exclusive” access to loan consolidation or cancellation programs.

If you send money the scammers might simply pocket it and vanish. But some continue the con and assume “management” of your loan, collecting your monthly payments but keeping most or all of the money instead of paying down your debt.

Several millions of borrowers may be eligible for a measure of automatic debt forgiveness under the Biden administration’s new plan. Existing federal forgiveness programs can erase part or even all of outstanding student debt under certain circumstances or conditions — for example, if you go into public service work or suffer a total and permanent disability.​

There are legitimate programs that have complicated rules and may require years of regular payments or steady employment in certain fields before you qualify to have your loan terms changed.

CAUTION

  • Do visit the Department of Education’s StudentAid.gov site for free information on getting help with federal student loans.
  • Do contact your loan servicer to learn about and apply for repayment and forgiveness programs, at no cost.
  • Do check out a debt relief firm before giving it information or signing any agreements. Ask your state consumer protection office about the company and use the Better Business Bureau’s directory to look up reviews and complaints.
  • Do be skeptical of calls and emails claiming to be from or affiliated with the Department of Education. Scammers impersonate or feign ties with government agencies, sometimes appropriating official titles or logos to appear legitimate. 
  • Do log in to your FSA account and change your ID if you think it’s been compromised, and contact your loan servicer to make sure no unwanted actions were taken on your loans.

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