With student debt relief program set to launch, beware scams

The Biden administration’s student debt forgiveness applications are not yet publicly available, but already Americans are receiving emails and phone calls promising federal student loan forgiveness.
Those offers are scams, the Federal Trade Commission warns.
“We hope that consumers will go to the Department of Education. If you’re looking for information about your student loans, (that’s where) to go,” said Michelle Grajales, an attorney with the FTC. “Studentaid.gov is the legitimate website, so a lot of our outreach focuses on trying to get people to be aware.”
The FTC and other organizations have for weeks been spreading the word about potential student debt relief scams. In August, Biden announced the Student Debt Relief Plan, a projected $400 billion plan that will benefit an estimated 40 million Americans saddled with federal student loans.
Through the program, individual borrowers earning less than $125,000 per year, or married borrowers with an annual income less than $250,000, are eligible to receive debt relief up to $20,000. Pell Grant recipients may also receive up to $20,000 student debt relief.
Since the program was announced in late summer, the White House has scaled back the program to exclude private student loans, but released few additional details. The Biden administration said loan forgiveness applications would be made available in early October, and folks can register to be alerted the moment those apps go live by registering for education department updates at https://www.ed.gov/subscriptions.
Uncertainty surrounding the student debt relief program has opened the floodgates for scammers looking to profit off eligible loan forgiveness applicants.
The most widely circulating student debt relief scams appear on the surface to be legitimate. Phone calls may register as a Washington, D.C., number, and the caller may provide a name and agent ID.
“They tend to impersonate the government or impersonate loan servicers,” said Grajales, adding scammers may acquire personal and loan information before the placing the call, for potential victims to confirm.
“(They) make it sound like they already had information about your loans … and will use that to sound like they’re calling from the Department of Education,” she said.
Other scams to be on the lookout for: Upfront fees for loan forgiveness or consolidation, and offers too good to be true.
“If someone calls you over the phone about your student loans, do not give them your FSA ID. Do not give them your birthday or any personal information,” Grajales said, noting the FSA ID is the student loan equivalent of a security number. “What they do with that, they will get access to your student loans, make changes, potentially cutting you off from your actual services. That’s where the damage starts.”
Grajales said if scammers change your loan information without your knowledge, or convince you their scam company is your new student loan servicer, you could spend years paying the scammer while your actual loans go into default.
Note there is no charge to apply for the Biden administration’s loan cancellation program. The White House announced that when applications are made available, those seeking student debt relief will not have to upload any documents or input their FSA IDs into the paperwork.
In a nutshell: Any offer that requires access to one’s financial records or account, payment upfront, or promises of financial forgiveness within a short timeframe is probably a scam.
Grajales offers “standard telemarketing advice” as protection against student loan forgiveness scams.
“Be suspicious of companies that call you,” she said. “If you’re not sure who you’re on the phone with … just hang up.”
Dial the number you have on file for the company that purportedly called you and, if you don’t have that number, search for the company online and call the number provided on its website.
Earlier this month, the Biden administration announced a crackdown on scams. The White House is working with departments and agencies, like the Federal Trade Commission, and top officials including state attorneys general to prevent student loan forgiveness scams and make reporting fraud easier.
Those who believe they or someone they know are a victim of student debt relief scam may report fraud to their federal student loan servicer or the state attorney general’s office.
The Consumer Financial Protection Bureau tracks complaints, including student debt relief scams. Visit https://www.consumerfinance.gov/ for to learn more about fraud or to file a complaint.
You may also file a fraudulent activity report with the FTC online at reportfraud.ftc.gov, or submit a complaint on the U.S. Department of Education’s Federal Student Aid site at https://studentaid.gov/feedback-center/.