Suppose your phone rings and the caller tells you about the Biden Student Loan Relief program, which can help you lower your monthly payments or even forgive your student loan debt. You just need to answer a few questions first.
Sounds good, right? There is only one problem: the âBiden Student Loan Reliefâ program does not exist.
It’s the story dozens of borrowers who shared their experiences with these scam calls on online forums, like Reddit, in the hope of getting some helpful advice.
Student debt relief scams are nothing new. In fact, consumer advocates say they were actually down thanks to a operation 2017 launched by the Federal Trade Commission, which filed suit against 36 companies that had collected more than $95 million in illegal fees.
So why are they increasing again?
Bonnie Latreille, director of research and advocacy at the Student Borrower Protection Center (SBPC), says the scammers’ business model is designed to exploit financial vulnerability.
âIf you target people who desperately need help, they will do anything, including give you all their information,â Latreille says. âWith the pandemic, there has been unprecedented unemployment, people are struggling. So the scammers see it as an opportunity to jump in,â she adds.
Moreover, all the current talk of student debt forgiveness proposals allows scammers to take advantage of consumer confusion.
Here’s what you need to know about student debt relief scams and what to do if you fall for them.
Four common tactics used by scammers
Scammers can be sneaky, but luckily for us, they have habits too. Look for these behaviors to spot a student debt relief scam before you provide too much personal information.
The caller creates a sense of urgency
Betsy Mayotte, president and founder of The Institute of Student Loan Advisors (TISLA), says that while scam scripts can vary, one thing they all have in common is that they try to rush borrowers into sign up for their services.
“They use talking points to create a sense of urgency, like it’s on a ‘first come, first served’ basis,” Mayotte explains. The tactic puts pressure on borrowers to act quickly and also prevents them from seeking the company’s services.
Here is an example of a voicemail left by one of the scammers to a Reddit user:
âWe tried to reach you because you qualify for the Federal Student Loan Forgiveness Program due to changes in 2020. It is imperative that I speak to you as soon as possible as the late student loan payment is on the point of coming to an endâ¦â
In this case, the scammer uses phrases such as “imperative” and “as soon as possible”, in addition to referring to the current suspension of federal student loan payments, as a way to induce the borrower to act quickly and don’t miss this “opportunity”. â
The caller promises to help you reduce your payments or get your loan balance forgiven for a ‘fee’
Although there are legit options that can help you lower your monthly paymentsthese are only accessible through your federal student loan officer, one of nine companies that the government pays to manage the federal student loan portfolio. The same goes for the student loan forgiveness.
So, if someone other than your repairer calls you to offer you lower monthly payments or a forgiveness, Mayotte advises you to hang up the phone. “If they’re offering this to you upfront, without knowing more about your situation, it’s absolutely a scam,” she adds.
If you’re having trouble making payments, you can always contact your servicer directly to see if you qualify for an income-based reimbursement plan to make your bill more manageable. Latreille of SBPC says that under these plans, your monthly payments could be as low as $0, depending on your situation.
Another way to quickly spot a scammer is to ask for money in exchange for these services.
Loan servicers “are there to help you for free,” Latreille says. “It’s never a company that says, ‘Pay us $49 a month to help,’ or whatever amount they offer.”
In other words, your student loan officer will never charge you for applying for an income-based repayment plan or student loan forgiveness program.
The caller asks for your credentials
If a company asks for your Federal Student Aid (FSA) ID or password, that’s a huge red flag.
âNo repairman will ever ask you that. The Ministry of Education will never ask you that,â says Mayotte.
Why? Because your service agent and the Department of Education do not need this information to access your account.
Scammers usually ask for this information to log in to your account and change your details, so the repairman cannot contact you to let you know about any issues. They may also use this information to impersonate you and suspend your loans.
During this time, you think you are making your reduced monthly payment, but in reality the company is taking all the money and nothing is going towards your student debt. “Then the loan is delinquent and they end up defaulting, and the borrower doesn’t realize that until their wages start being garnished,” Mayotte says.
The caller invites you to sign a document to act on your behalf
Some of these fake companies will ask you to sign a document authorizing them to renegotiate your student loan repayments.
They’ll even use phrases like “we take care of everything, so you don’t have to contact your repairman” to trick you into thinking it’s done for your convenience. But in reality, what you are signing is a power of attorney, giving them the right to act on your behalf, legally.
Once they have this document, they can do anything from changing your account details to consolidating your loans to forbearance. And, in the worst case scenario, they can use this power of attorney to gain access to your bank account or other sensitive information.
Tips to Protect Yourself Against a Student Loan Debt Relief Scam
If you get a call from someone offering some sort of relief program that you haven’t applied for, Latreille says the best thing to do is hang up. But if you have any doubts, she recommends asking if you can call them back before giving them information. This will give you the opportunity to research the company’s name and phone number to make sure it’s legitimate.
Mayotte also says to never share your FSA information with anyone, as the PIN can be used not only to change your information, but also to change your reimbursement plan without your knowledge.
If the company contacts you by email, be sure to check their website or company logo.
“Often they use logos that are remarkably similar to a legitimate student loan service to confuse borrowers,” Mayotte says. “I’ve seen logos for these companies that look a lot like the Ministry of Education logo,” she adds.
Finally, be careful where and with whom you share your personal and credit information.
Student loan calculator websites with poor encryption are access points for scammers to gather the information they need to design their scam, including your name, email address, phone number – and even the student loan balance. If you want to calculate your monthly payments, you can always do so by consulting the Federal Student Aid website.
If you’re applying for a credit product, make sure it’s from a company that’s been around for a long time or has a solid reputation, so your information doesn’t end up in the wrong hands.
A few years ago, the Consumer Financial Protection Bureau (CFPB) filed a complaint against Monster Loans, a California-based mortgage lender. The lawsuit said the company used information from its customers’ credit reports to run a student debt relief scam, affecting more than seven million borrowers. The case is still pending resolution.
What to do if you think you’ve been the victim of a student loan repayment scam
The first thing you should do if you think you’ve fallen victim to one of these scams is to contact your bank or credit card company to stop any payments to that company. Latreille also says to keep an eye on your credit report to see if there’s any unusual activity. If so, contact the places where these transactions took place to dispute them immediately, so as not to damage your credit.
Then the next step is to contact your federal student loan officer to explain what happened, as they usually have procedures in place to help borrowers in these situations.
“A lot of people feel ashamed or embarrassed,” says Mayotte. “They don’t want to point it out because they feel like it makes them feel like they weren’t that smart, and that’s not the case at all.”
If you have signed a power of attorney, be sure to notify your service agent, bank, and credit card company, so they can have it revoked immediately.
Once you’ve done all of this, you should also report the incident to the Federal Trade Commission, the CFPB, or your district attorney, so they can look into it and hopefully stop this company from getting involved. scam other consumers.
More money :
Should you keep paying your student loans even though they could be forgiven?
New tax break could push more businesses to help workers pay off student loans
Who’s making those annoying “your car warranty has expired” calls and why don’t they stop?