US President Joe Biden announces student loan relief with Education Secretary Miguel Cardona (Photo … [+]
Student debt relief means millions of borrowers will be $10,000 or $20,000 better off. Unfortunately, it also means millions of targets for student loan scammers.
Student loan scams are nothing new but have increased in scale with the Biden administration’s decision to provide student loan debt relief. Last week, to help borrowers avoid falling victim to scammers, the administration released a fact sheet detailing its actions to crack down on scams.
The administration also released an extensive list of student loan debt relief do’s and don’ts designed to help borrowers safely navigate the next couple of weeks until the loan forgiveness application is released.
The Biden administration announced in late August that it would forgive up to $20,000 in student loans for students who received Pell Grants while in college (Pell grants are federal financial aid generally awarded to low-income students) if they meet income criteria. Other eligible borrowers will see $10,000 in forgiveness. Borrowers who earn less than $125,000 ($250,000 for couples) based on their 2020 or 2021 Adjusted Gross Income will be eligible for the plan.
How Is the Biden Administration Trying To Prevent Student Loan Scams?
The administration is launching a comprehensive campaign to provide student loan borrowers with accurate and timely information about student debt relief. The information campaign will include social media, email outreach, and regular blog posts to help keep borrowers informed.
The administration will also work with various federal and state agencies, including The Consumer Financial Protection Bureau, The Federal Trade Commission, and State Attorneys General, to provide information on scams and coordinate responses to them. These efforts are intended to help law enforcement shut scammers down as quickly as possible.
How Can You Avoid Scams?
Many scams rely on creating a sense of urgency or the idea that you might miss out on something to get you to make rash decisions. This makes it hard to figure out what is a scam and what is a legitimate organization trying to help struggling borrowers, such as the Project on Predatory Student Lending and the Student Borrower Protection Center. There are real deadlines for specific programs that many legitimate organizations will be pushing borrowers to apply for over the coming month. For example, the Public Service Loan Forgiveness waiver ends on October 31st, and there will be increased pushes for borrowers to apply before the easier application rules go away.
The new guidance from the Department of Education (ED) includes never paying anyone who promises student debt relief, avoiding providing personal information to unknown callers, and not refinancing federal student loans unless you know the risks of what you might be giving up. Borrowers who refinance federal loans with a private lender will not be eligible for debt relief.
There are proactive steps borrowers can take to ensure they know what is happening with student debt relief. All borrowers should sign up for updates at www.ed.gov/subscriptions. Borrowers who sign up will receive ongoing email bulletins and be the first to get the announcement when the debt relief application becomes available.
ED also recommends that borrowers create a Federal Student Aid (FSA) ID at StudentAid.gov. The FSA ID is not a requirement for the debt relief application but allows you to easily access accurate information about your federal loans and ensures that FSA can contact you with important information about student debt relief and different payment options.
As much as possible, verifying any information with federal websites that end in a .gov web address is best. For student loan debt relief, ED has said the application will be available until December 31, 2023. So, anyone saying you need to apply immediately, or you will miss out on forgiveness is probably a scammer.
ED is asking anyone contacted by scammers to report them to the Federal Trade Commission. Reporting scams makes it easier to shut them down.
The student debt relief application is meant to go live sometime in October, reducing uncertainty and minimizing opportunities for scammers to take advantage of borrowers. Until the application is available, it is wise to be cautious about any unsolicited or too-good-to-be-true offers of help with student loan debt.
