Administration

How to tell if you’re the victim of a student loan scam — and what to do about it

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Millions of student loan borrowers have flocked to the Biden administration’s newly unveiled application for broad-based debt relief since it was released earlier this month.

But federal officials want you to know there are others “on the move,” too.

In recent weeks, federal agencies have been warning of the threat of student loans scams, and even the White House is spreading the word about fraudsters targeting borrowers.

Here are a few ways to spot some of those scams, and how to stay safe.

The Education Department will likely never call you

A common tactic among student loan scammers is to call an individual and pretend to be a government official from the Education Department. 

However, borrowers can be assured they won’t receive calls from the Education Department because officials won’t contact individuals directly about repayment programs or their loans, according to Student Debt Crisis Center (SDCC) President and Founder Natalia Abrams.

“The Department of Education and your federal student loan servicer will never call or email you asking for this information,” the department said in a statement at the beginning of October, referring to a person’s Federal Student Aid account ID or password. 

The department also emphasized the new student relief program is free for applicants to apply and get loan forgiveness. 

Abrams told The Hill that individuals have lost thousands of dollars from these scams and have signed over their power of attorney for a “bogus company” to handle their loans. 

Calls about repayment programs

Scammers will try to convince individuals they have to pay money to join a repayment program to handle their student loan debt. 

“If someone calls you asking to enroll in a government program, hang up the phone,” Abrams said. 

Scammers could pretend to be loan service providers, as those providers do call borrowers, but Abrams said there are ways to tell the difference between the scammers and loan service providers. 

“Unfortunately, loan service providers will not take the time to offer you repayment programs or walk through them and they would just be asking you to pay your bill,” Abrams said. “They would not be asking if you want to enroll in these programs.”

There are times when a borrower could pay for help with their loans, such as working with a financial adviser or accountant for assistance in understanding programs, but those are calls a borrower would make, according to Abrams.

These individuals or programs will not call you first. 

Check for a “.gov” email address or website

Scammers will not only call on the phone, but attempt to reach you through your email. 

If a person receives any email about student loan programs they are not expecting and the sender does not have a .gov email address, it is most likely a scam. 

On the other hand, any information you read that comes from a .gov website can be trusted. 

“We’ve had people ask us if the one time debt cancellation is legit on studentaid.gov,” Abrams said. “If you are on a .gov website, or you receive information from a .gov email, no one in this country can own a .gov unless you’re from the government.”

Understand the resources available to you

Experts are urging borrowers to become more familiar with the trusted resources already available to them to reduce chances falling prey to a scam, starting with their Student Aid account.

Borrowers with any questions about the status of their student loans and what benefits they are eligible for can look to the account as a prime source for information, Michelle Grajales, an attorney at the Federal Trade Commission (FTC), said. 

“If you want information, your federal student loan servicer should also be able to kind of talk you through your eligibility for particular benefits or programs,” Grajales said.

“Also, it’s important to remember that no one’s debt has been canceled yet,” Amber Saddler, counsel at Student Borrower Protection Center, said, pointing to a recent legal challenge temporarily tying up the relief.

In the meantime, the Biden administration has encouraged borrowers to continue applying using its online forgiveness application, while expressing confidence the temporary pause on the relief will be lifted.

Borrowers can also subscribe to alerts for student borrower updates via the Department of Education’s website here.

What to do if you think you’re the victim of a scam

If borrowers suspect they’ve fallen victim to a scam, the government wants to hear about it.

“Go to reportfraud.ftc.gov,” Grajales advised. There, the lawyer said borrowers can fill out a complaint online. The more information provided, according to the attorney, the more officials will be able “to understand what’s going on.”

Grajales also said it’s important for borrowers to get on the phone with their servicer if they think they’ve been scammed to make sure their information is accurate.

“The way a lot of these companies work is they will impersonate the borrower, and change all the contact information to effectively kind of sever the borrower from their loan servicers,” Grajales said, explaining the aim is to “step in between a borrower and their loan servicer.” 

“That way it makes it harder for the consumer to realize when they’ve been scammed, and also allows companies to, you know, maybe go on collecting fees, etc.”

“If you have paid money, you may want to contact your bank and see what options you might have for stopping a payment that’s in progress,” Grajales continued.

However, Grajales also acknowledged there are time limits for certain courses of action when it comes to older complaints. For example, she noted, “if it’s a statute that allows us to seek civil penalties, that’s only going to usually go back about five years.”

“There are time limits in terms of your remedies that you might have with regards to getting money back from your bank or your credit card,” she said, but “it’s still a good idea to complain if you feel that you’ve been scammed.”

“Even if you haven’t given them any money, but you just think you’ve encountered what looks like a scam, and you want to tell us about it,” do that, Grajales added.

The FTC told The Hill on Wednesday that, in the first three quarters of 2022,  it received about 57,000 complaints “about student loans generally” —  a figure that has already exceeded totals recorded from the previous two years.

Out of those calls recorded this year, roughly two-thirds of those calls were “related to student loan debt relief, including scam calls,” the agency said.

Don’t expect these scams to end

Although student loan scams have ramped up amid the confusion surrounding the student debt relief program, these student loan scammers were around long before the program and will stay after the program. 

Abrams said she is glad the government is stepping up to talk about these scams, but says “it would have been better if they would have been talking about this sooner.”

“This has been a pervasive problem for a very long time,” Abrams said. “And its only gotten worse because of [student debt] cancellation. It’s great they’re finally bringing attention to it but they needed to for a long time.”

The scams regarding the debt cancellation will be ongoing for a while as the applications are open until the end of 2023 and the court proceedings against the program continue. 

The only way to get the debt relief is applying through the free application on the Federal Student Aid website. Borrowers should apply even while the courts are deciding the legality of the program. 

Tags Amber Saddler Biden Biden administration Department of Education federal student aid Federal Trade Commission Michelle Grajales Natalia Abrams scams scams Student Borrower Protection Center Student Debt Crisis Center student loan debt relief Student loan forgiveness Student loans

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