When you’re in a lot of debt, there’ll be people who will try to take advantage of you. These fraudsters charge you thousands of dollars with a promise of lowering your student loan payments and student debt forgiveness. The student loan scams have cost borrowers over $95 million, according to the Federal Trade Commission (FTC). But that’s about to change for good!
On December 7, 2020, the House and the Senate passed a bipartisan bill. In that bill, anyone who gains unauthorized access to the U.S. Education Department’s information technology systems for “commercial advantage” or personal gain commits a federal crime.
Scammers can be fined a maximum of $20,000, serve in prison for five years, or both. The bill is called the “Stop Student Debt Relief Scams Act.” It’s set to increase exit counseling requirements for universities and colleges that take part in the federal student aid programs.
Exit Counseling Plan To Curb Student Loan Scams
The purpose of the exit counseling is to decrease student loan scams substantially by warning students about the fraudulent student debt relief agencies. (By the way, not all student debt relief companies are frauds. We’ll explore more below.)
According to the law, the Education Department would have to prevent thieves and hackers from accessing their database. And also to warn students if they notice anything suspicious with their accounts.
The COVID-19 student loan forbearance ends on the last day of the month, January 31, 2021. It’s expected that more fraudulent companies will try to prey on desperate student loan borrowers. So beware!
Why You Should Be Alert About Student Loan Scams
We are yet to see if the Stop Student Debt Relief Scams Act will become law. But even if it doesn’t, you should watch out for student loan scams, both old and new.
Most of the worst scammers have been laying low since the federal government paused the interest and payments on federal student loans. But you can be assured that they will spring up again after it ends on January 31, 2021.
To avoid being a victim, you need to follow the advice the U.S. Department of Education gives. According to them, you don’t have to pay for assistance when it comes to your federal student loans or financial aid. Unfortunately, numerous companies pretend as debt relief institutions that can offer a quick way out of debt.
Usually, these companies ask for $1,000 or more before helping you. Meanwhile, you can get that same service for free at the U.S. Department of Education. When you agree, they sometimes steal your personal information or personal identity.
How To Spot Student Loan Scams
You can most easily spot scammers because they tend to make outrageous claims. But it can be beneficial when you know what to watch out for. These fraudulent companies might say you have to make payments now for their service, or you’ll lose the chance altogether.
Some even might assure you that you’ll get more financial aid, which is so not true. A third-party company can’t pull that off. Some companies are also more interested in acquiring your personal information instead of assisting you with your student loan debt.
Here’s an example. The scammers can promise to decrease your loan debt or help you become eligible for more financial aid. However, you have to give them your credit card number or bank account information for that to happen.
That said, you can be sure that you’re working with a fraudulent firm if any of the following happens:
Make An Advanced Payment
The company asks you to make an upfront payment or monthly fees before they can help. It’s a crime to ask for upfront fees before they can help you get rid of your debt. If a firm asks you to pay anything, that should be your cue.
Immediate Student Loan Forgiveness
If the company assures you that they can have your student loans forgiven, that should be your red flag. According to the U.S. Department of Education, no one can promise immediate and total loan cancellation or forgiveness.
Most federal forgiveness programs take years of qualifying payments or employment in a qualified public service position. If a company says they can somehow work out a way for you, they’re deceiving you. It’s simply not true.
When A Company Asks For Your FSA ID
You should be wary when a student debt relief company asks you for your FSA ID or password. Even the U.S. Department of Education will never ask for your FSA ID or password. If anyone gets a hold of this information, they can use it for numerous atrocious purposes. For example, they can make changes to your account.
Asks For Power Of Attorney
Has any company asked you to grant them power of attorney? This is a clear indication of fraud. If a debt relief firm asks for legal authorization to make decisions in your stead, you should run.
The Companies Don’t Look Professional.
The fraudulent companies are terrible at communications. They don’t look professional. If you’ve ever received an email or any printed information, you’ll find lists of grammatical errors. That’s a perfect sign that the company is not legitimate.
According to the Federal Communications Commission, you can receive robocalls from people who promise financial relief. You can only make any changes to your student loans with your loan servicer. And that will have to be in partnership with the U.S. Department of Education.
If you receive any calls from anyone telling you otherwise, you’re dealing with a scammer.
The Right Way To Get Assistance With Your Student Loans
All payments and interest are currently waived on almost all federal student loans until January 31, 2021. That means if you have qualified federal student loans, you can skip payments and not worry about any accruing interests until February 2021.
It’s possible that the federal government can extend the temporary forbearance. So you should regularly check on the official FSA page. Also, keep in mind that you can change some of the terms on your student loans with your loan servicer.
For example, you can change from the standard ten-year repayment plan to an extended repayment plan. That way, you could have lower payments every month. You can also check out if you’re eligible for loan forgiveness programs targeted at particular professions or other service programs such as PSLF.
You can also check if you can repay your student loans on an income-driven repayment plan. However, whatever happens, don’t fall prey to the mails and calls from a company that says they can get rid of your student loans for you. They can’t help you, and they might even steal your assets or your identity.
Are All Student Loan Relief Companies Scam?
No. They’re not. Yes, you don’t need to pay anyone to take care of your student loans for you. You can do it yourself at StudentAid.gov. However, some people need help, which is fine—all you need is to find a legitimate student loan relief company.
We know this might sound counter-intuitive, but you can call your student loan servicing company. You can solve 80% of your concerns, and issues can be resolved when you talk to your loan servicer. If you don’t prefer student loan servicing, you can speak with a financial planner who’s an expert in student loan debt.
You can also reach out to us. At Student Loans Resolved, we help you figure out what to do with your student loans. We assist you through the entire process until you attain your financial freedom. Contact us at 800-820-8128, and we’ll help you out.
How To Report Student Loan Scams
If you come across a fraudulent company, file complaints with the Consumer Financial Protection Bureau (CFPB). You can also send your complaints to your state attorney general’s office and the Federal Trade Commission. These organizations rely on consumer complaints to protect students from scammers. They can also get your money back to you when possible.
There are numerous student loan scams out there because filling out the necessary paperwork can be time-consuming and complicated. But if you acquire the right information, you’ll know how to get the government to help you for free without losing money to scammers.
Fortunately, the federal government will make student loan scams a federal crime, which will reduce the number of scammers in the country. But you can’t wait for that to happen before you take action on your student debt. Follow the steps we’ve provided in this article, and you’ll tackle your debts without losing thousands of dollars to scammers.
However, you may not have the time to take over your student loan debts for various reasons. That’s why we recommend legitimate student debt relief agencies. These firms can help you get rid of your student loans the legal way. You can contact us at 800-820-8128, and we’ll assist you with your student loans.