With the Biden administration’s announcement to cancel up to $20,000 in federal student loan debt for low- to middle-income borrowers, many consumers see a chance to gain some financial ground. Unfortunately, scammers have recognized the same opportunity.
Student loan forgiveness scams have already seen an uptick since the announcement was made. Here are the signs to watch for and how to keep your personal information safe.
How to Avoid Student Loan Forgiveness Scams
Don’t Pay Fees—Forgiveness Is Free
One of the most prolific student loan scams is a company saying that you must pay to be eligible for student loan forgiveness. Scammers may even say they can get your entire student loan balance forgiven, even if it’s more than the amount that President Biden announced.
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It’s always free to apply for federal loan forgiveness programs, and paying a fee will not expedite the process or increase your chances of approval. If a company promises to fast-track your application in exchange for a fee, they’re trying to scam you.
“Usually, they will approach you with something that sounds too good to be true,” said internet security and fraud expert Adam Levin, host of the podcast What the Hack with Adam Levin. “It’s anything to get you to act impulsively and provide money or provide personal identifiable information.”
It’s also important to know that the federal government will not contact you via phone to discuss your student loans. “The real Department of Education won’t be calling you, just like the IRS doesn’t call you,” Levin said.
Guard Your Personal Information
Phishing scams are a common way that fraudsters access consumers’ personal information. You may receive an email or text that looks legitimate, asking you to share details about yourself or your account—but it’s actually from a scammer trying to steal sensitive data.
Say, for example, you get a phishing email claiming to be from the Department of Education. It could include the official Department of Education logo and the sender’s email address may look real, but after clicking on the provided link you’re taken to a fake site that requests your personal information.
If you provide information like your Social Security number or account details, hackers can use that data to steal your identity, open credit cards or loans in your name or access your existing accounts. Levin said you should also never open any attachments in a dubious email, as they may contain ransomware that can be used to steal your information.
To spot a phishing scam, consider if you actually have an account with the company before clicking anything. Look for typos and incorrect grammar in the text; generic greetings like “Hello Customer” can also be a red flag. Review the URL that is linked within the email and watch for subtle misspellings or strange formatting.
Lastly, look for the company’s contact information within the email. If it’s not included, that’s another red flag. When in doubt, contact the company directly to confirm any action needed on your account.
Review Trusted Sources of Information
In the past two years, there have been many changes to federal student loan programs, including Covid-19 student loan forbearance and Public Service Loan Forgiveness. And with Biden’s recent forgiveness announcement that promises large-scale relief, there’s a lot of new information to parse through.
If you receive a phone call, email or text that makes too-good-to-be-true claims, don’t feel pressured to hand over your information. Take time to verify the claims on trusted websites and make sure you’re actually communicating with a reliable source.
To ensure you’re getting the right information, stick to official sources like the Federal Student Aid website and your student loan servicer. You can also sign up for updates from the Department of Education to receive notifications about student loan forgiveness.
Wait to Refinance
There have been anecdotal reports of some loan servicers encouraging borrowers to refinance their student loans before interest rates increase again. While interest rates are rising, refinancing federal student loans will affect your eligibility for forgiveness.
When you refinance federal student loans, they become private debt and will no longer be eligible for federal benefits like income-driven repayment plans, extended forbearance plans and, most importantly, loan forgiveness options.
If you refinance your federal loans right now, you’ll miss out on Biden’s loan cancellation. There is no way to undo refinancing; it is final and permanent. Thoroughly research the pros and cons of refinancing federal student loans before taking any steps—and if you’re eligible for Biden’s forgiveness opportunity, wait until that is fully processed before refinancing.
What to Do if You Think You’ve Been Scammed
Contact Your Bank or Credit Card Company
If you mistakenly pay a company to help you with loan forgiveness, you can try to get your money back through your bank or credit card company.
Call your bank or credit card issuer’s fraud department as soon as possible, even if the money hasn’t been withdrawn from your account yet. The bank can close your account, send you a new card or put an alert on your account for any suspicious withdrawals. The representative should also be able to explain your eligibility for a refund of lost money.
File a Complaint
If you’ve been scammed, contact the official Federal Student Aid website to file a complaint. You can also report the fraud to the Federal Trade Commission and your state attorney general’s office. Filing a complaint may help you get your money back, and it will also alert authorities to new scams and raise public awareness.
Utilize Your Identity Theft Insurance
Some renters and homeowners insurance policies include identity theft coverage, or you may have chosen to add it to your standard policy. If you have this coverage, the insurance company may help pay for any expenses incurred while trying to get your identity back.
Levin says insurance companies may also provide access to trained fraud experts who will guide you through the process. Reversing the damage from identity theft can be a stressful and time-consuming process, so having a professional in your corner could be a real help.