How to Avoid COVID-19 Student Loan Forgiveness Scams
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Student loan borrowers were targets for scams before the coronavirus pandemic hit. The longer people struggle, the more desperate they become, and that’s when scammers and fraudsters thrive.
“They’re using the same playbook, but more aggressively,” says Seth Frotman, former executive director of the Student Borrower Protection Center, a Washington, D.C.-based nonprofit.
There’s no single scam related to coronavirus relief or specific company to pinpoint that is being prosecuted right now, says Leslie Tayne, a debt-relief attorney and founder of Tayne Law Group. But fraudsters are still out there.
There are two main types of scams, says Frotman. In one scam, a company will charge to enroll you in a benefit you could have accessed for free, such as a federal income-driven repayment plan.
Tayne says she most often sees scammers promising to get borrowers into a loan deferment program in exchange for payment.
In another scam, you’re promised something too good to be true — like forgiveness — in exchange for payment. Then they take your money and run.
“It used to be called the Obama Loan Forgiveness scam, and now there’s the CARES Act Forgiveness scam,” says Persis Yu, policy director and managing counsel for the Student Borrower Protection Center.
“Borrowers should always look upon advertising that is promising forgiveness with skepticism,” says Yu.
No student loan forgiveness was included in either coronavirus relief package. Currently payments are paused on virtually all federal student loans through Aug. 31, 2022, and no interest is accruing. The new Biden administration has pledged to make $10,000 in federal student loan forgiveness a priority, though no legislation has been introduced.
How to figure out what is legit
As you’re assessing what is real and what is not, take a beat to independently verify a company on third-party sites like the Better Business Bureau’s. Here’s what else you can do:
See if there are news stories about scams alongside a business’s name in an online search. Remember: Anyone can pay for a domain name and start a website. Logos, addresses and mailers are easy to replicate, too.
Be wary of solicitations that arrive in your inbox or that you see on social media ads. Even if you’re contacted by a party that has your personal information, it doesn’t mean it’s a legitimate organization, says Tayne.
If you get a robocall regarding student loan repayment during the coronavirus pandemic, don’t call back. The Federal Communications Commission has seen these and is warning consumers not to fall for these scams.
Find more information on student aid scams on the federal student aid site.
Real relief measures available for borrowers
Both the first and second coronavirus relief packages did include provisions for most federal student loan borrowers, but not private loan borrowers. Individual private lenders are offering benefits such as short-term emergency deferment or waived late fees.
Federal loan borrowers are in the midst of automatic forbearance — with no interest — that will expire after Aug. 31, 2022. Borrowers with loans in default also get relief from collection activities like wage garnishment.
However, the implementation of these benefits hasn’t been smooth, says Yu. The National Consumer Law Center and another nonprofit, Student Defense, sued the U.S. Department of Education over allegations that the department continued garnishing wages despite the provision in the law that prohibits it.
Implementation mistakes have left borrowers more vulnerable to getting scammed, says Yu.
“They’re desperate, and they might be entitled to relief and they're not getting it,” she says. “Our policymakers and the Department of Education need to step up to get this right so borrowers are not driven to companies leeching off their desperation.”
You should be receiving all relief automatically for federal loans. If you’re not, contact your servicer and make a complaint in writing.
What to do if you've been scammed
If you’ve been scammed, the first thing you need to do is get control of your accounts.
“One common iteration of these scams is the company will take over the FSA ID or servicer account and redirect any communications to that company,” says Yu. (The FSA ID is the unique username and password used to log into the federal student aid online system.)
• If you’ve given a scam company your password, change your password. You may need to change the email address your account is linked to.
• Make sure to report the scam to authorities as well, says Tayne, and hold onto copies of those reports.
• The Federal Trade Commission, your state attorney general and the Consumer Financial Protection Bureau are options for reporting scams. Each one actively pursues student loan scammers, but they rely on borrowers to self-report.
• If you’re looking to take legal action, contact a legal services organization (if you’re income-eligible) or hire a lawyer.
Frotman, Yu and Tayne each said that borrowers sometimes get their money back, but it takes effort.
If you need student loan help
If you’re struggling with your student loan debt, first speak with your servicer or lender to:
Discuss repayment options.
Take a temporary payment pause.
Temporarily reduce your monthly payments.
If your problem is with your lender or servicer or you’re not getting the help you need, look for a legitimate student loan help organization that offers counseling. Consider these vetted resources for student loan help; they are established organizations with verified histories:
Student loan help resource
Advice on repayment plans, forgiveness programs and dispute resolution.
Comprehensive information on options for student loan borrowers.
Advocacy on behalf of all borrowers to influence policy.
Complete financial review for struggling borrowers, which can include advice on student loan options and plans for dealing with other debt.
Advice on repayment plans, help with paperwork and budget counseling.
Information for student loan borrowers and an attorney directory.
Help for borrowers who have already filed bankruptcy that did not include their student loans.
Advice on defaults, dispute resolution, collections, debt settlement and legal remedies. Licensed in Massachusetts and New York.
Advice on debt settlement, bankruptcy, default and forgiveness. Licensed in Missouri and Illinois.
Many of these organizations offer advice for free. In some cases, you may need to pay a fee, as with a certified nonprofit credit counseling agency or if you hire an attorney.