With the cost of college rising, so is the need for student loans. There are currently 43 million federal student loan borrowers, with an average of nearly $30,000 owed per student, according to Forbes.
In August of 2022, the U.S. Government announced it will be forgiving up to $20,000 in student loan debt for each borrower. This puts money back into pockets of consumers to combat the inflation rates.
Since the big announcement, there has been very little information released about the application process. Yet, scammers are already capitalizing on this opportunity to release misinformation about the program through text messages, phone calls, and emails.
Over the past few months, the Federal Trade Commission has stopped many scam companies, but fraudsters continue to try to take advantage of borrowers with promises of expedited loan forgiveness.
As your credit union, we are here to support you in ensuring your money and personal information is safe and secure from these fraudsters. Here are four red flags to watch for if you’re contacted about student loan forgiveness programs:
What Red Flags Should I Watch For?
1) Upfront Fees
As the government releases information about the program, they have made it clear that there is no need to pay anyone to obtain debt relief or loan forgiveness. If a student debt relief company charges you, it is a scam, even if it appears legitimate. The Federal Trade Commission monitors this program and these “businesses” and has confirmed that these services should be free of charge.
2) Expedited Loan Forgiveness
If a company promises they can have your loans forgiven quicker than the timeline provided by the Department of Education, it is a scam. With that being said, scammers will try to use the Department of Education logo to appear legitimate. Always check the official website to confirm.
3) Credential Requests
Being careful with your personal information is key to avoid fraud. Legitimate companies will not ask for your FSA ID. If you are asked for these credentials, scammers might be attempting to steal your identity, which can have long-term impacts on your entire financial situation. The Department of Education will never contact you asking for this information. When in doubt, call your student loan servicer directly.
4) Strict Deadlines
When we are put under pressure, we often fail to consider our decisions completely. That’s why scammers will make you believe that requests for payment or information are time-sensitive to make you act quickly. They do this so you don’t take time to think about the program’s legitimacy or fact check their process. If you’re feeling rushed, take time to think and research before providing any information.
What Do These Scams Sound Like?
The fraudsters behind these types of scams are sophisticated criminals and often strong communicators, able to convince victims to make poor decisions that lead to their information being compromised. You may receive text messages, emails, or phone calls with information such as:
- “Act now to qualify for student loan forgiveness before the program is discontinued soon.”
- “Your loans may qualify for complete discharge. Enrollments are first come, first served. Respond now to get started”
- “Student Loan Forgiveness Alert: Your loan is flagged for forgiveness pending verification. Call now to finish the process!” These types of messages are almost always fraud. If you believe a certain message could be legitimate and from your servicer, reach out directly to them instead of calling the number listed or responding to the message.
What If I Fall Victim?
While avoiding any type of fraud proactively is the most ideal case, you might realize that you’ve fallen victim to a scam at some point. If so, we encourage you to take these steps to do your best in securing your finances and identity:
Get in contact with your loan servicer and financial institution.
File a complaint with the FTC at ReportFraud.ftc.gov and your state’s Attorney General.
Freeze your credit report with the 3 major bureaus: Equifax, Experian, and TransUnion.
Change your passwords, including your FSA ID, student loan account, and online banking logins.
How Can I Proactively Manage My Loans?
We’re here to help you with that! First, we encourage you to learn more about loan forgiveness, and student lending in general, with one of our experts by scheduling a free one-on-one appointment. They will guide you and answer all your questions.
Next, to take advantage of the Pell Grant, visit www.studentaid.gov to apply for the official Student Loan Debt Relief program.
Lastly, consider opportunities to Refinance with Elements to consolidate private and federal loans. You may be able to receive a lower interest rate and extend your repayment term to lower your monthly payment.
Overall, Elements is committed to being your financial partner, and we are here to guide you. Reach out to us at any time for advice and education on your personal situation. And most importantly, be alert and aware of scams in the marketplace – avoiding them altogether is the best case scenario!