It didn’t take long after President Biden announced his student loan forgiveness program in August for the scammers to get up and running. The Better Business Bureau (BBB) and federal agencies have unearthed hundreds of ads, text messages, phone calls, and emails targeting student loan borrowers. Their purpose? To get consumers to divulge private financial information or to pay for unnecessary services. In early October the U.S. Department of Education issued warnings about the student loan forgiveness scams and advice on how to avoid them.
Keep reading to learn how student loan forgiveness program scams try to fool you, and how you can avoid getting duped.
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Status of Biden’s Student Loan Forgiveness Plan
The student loan forgiveness plan would cancel up to $10,000 in federal student loan debt for single borrowers with an adjusted gross income of less than $125,000 a year, or less than $250,000 for married couples. Pell Grant recipients could have as much as $20,000 in student debt canceled. To refresh your memory, check out this story on the student debt relief plan.
The Department of Education (DOE) officially began to accept applications for forgiveness on Oct. 17, 2022. The application timing is designed to give borrowers enough time to get relief before the moratorium on student debt payments ends — and payment resumes in January 2023.
The processing of debt cancellation, however, could face delays because of several lawsuits challenging Biden’s program. A U.S. Federal District Judge is set to rule sometime in October on a preliminary junction on the plan until a final ruling.
While borrowers wait for more details, scammers are actively using phony government websites, false promises, and other criminal schemes to lure unsuspecting consumers. Here’s what you need to know to avoid student loan forgiveness scams.
Types of Student Loan Forgiveness Scams
Watchdogs have identified a variety of scams related to student loan forgiveness. Some are aimed at borrowers searching out information on the internet, and others directly target people who hold student loans. Fortunately, certain patterns are coming into focus. Here’s a rundown of what officials have seen so far.
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False Deadline Warnings
These scams include texts, calls, and emails sent to borrowers conveying a false sense of urgency that they must take action before a certain date or miss out on forgiveness. In reality, the messages are designed to scare you into disclosing personal financial information, which criminals may then use for identity theft and other financial fraud. Be very wary of any “student loan forgiveness center” calls.
On Oct. 17, the DOE opened the official forgiveness application portal. The deadline for applications is the end of 2023, but you’ll want to apply a lot sooner if your payments will be resuming in January.
What’s more, for many borrowers who already have income information on file with the DOE, forgiveness will be automatic. No application — and no deadline — is necessary.
Fake Email Alerts
Especially while borrowers were waiting on an email from the DOE informing them that the forgiveness application was open, scammers are sending fraudulent emails that look as if they might be from the government in an effort to collect personal financial information. This and other fraudulent strategies are expected to continue.
To make sure you’re responding to a legitimate email, always check the address of the sender. The full address isn’t always obvious on a phone or other mobile device: That interface often shows only the name of the sender. Always click on the sender’s name to see the actual address.
The address is likely to be the real thing if it has a .gov ending, something not easy for fraudsters to imitate.
You can sign up for student loan forgiveness notifications and updates from this DOE webpage.
Help With the Student Loan Forgiveness Application
There are lots of offers on the internet and elsewhere to help borrowers claim their loan forgiveness — for a fee. While not all of the companies offering these services are illegitimate, the DOE has warned that it won’t be necessary to pay for help. They promise the application will be simple and quick to complete.
Predatory companies love to use webinars and videos explaining the details of the loan forgiveness program. The ending is always the same: a plea to sign up for their paid service, with the promise they’ll get you your debt relief. They may claim they can get you additional benefits, get your benefits faster, or get you to state tax breaks if you pay them upfront. In some cases, the outlaws charge hundreds of dollars for unnecessary service.
A real government agency will never ask for an advance processing fee. And legitimate student loan servicers will never charge a fee for providing information about your loans. You can check if a company works with the DOE at the Federal Student Aid site on avoiding scams.
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What You Can Do to Avoid Scammers
To protect yourself from student loan forgiveness program scams, familiarize yourself with the following tips. They can help you avoid the threat of costly identity theft or financial fraud that can result from these schemes.
- Never give out your FSA ID, student aid account information, or password. The DOE and the company that services your federal student loans will never call or email asking you for this information. Along the same lines, never give your personal or financial information — including your Social Security number and bank account information — over the phone or email. (That said, the beta version of the forgiveness application asks for your Social Security number but not your FSA ID.)
- Avoid upfront fees. Think twice before paying anyone for help filling out the application. It is highly likely you won’t need help because the government is promising a free and easy-to-use application. Paying a fee before the application is even available is totally unnecessary.
- Stay up-to-date. Having the most accurate and current student loan forgiveness information is the best defense against fraud. As mentioned above, sign up with the DOE for notifications and updates. And keep an eye on the Better Business Bureau and Federal Student Aid websites for the latest official information.
- Update your contact information. To receive official notices related to student debt relief, make sure the government and your loan servicer have your most current contact information. If your income information is already on file at the DOE, qualifying borrowers will automatically receive loan forgiveness without having to apply. All borrowers, whether or not they have to apply, will be notified by the DOE when the application goes live.
- To make sure you get these notices and other updates, sign up with StudentAid.gov to receive text alerts. If you don’t have a StudentAid.gov account, create one now.
You’ll also want to make sure your student loan servicer has your most recent contact information. You can find your federal student loan servicer’s contact information at Studentaid.gov/manage-loans/repayment/servicers
Understanding how student loan forgiveness scammers work is an important step toward protecting yourself. Staying up to date on the latest official news and announcements can also help you bypass the onslaught of scams out there. Another important defense: Actively manage your student loan accounts and make sure all of your information is accurate and up to date.
SoFi can help. If you have more federal student debt than the new debt relief plan will forgive, or you don’t qualify for loan forgiveness, or you have private student loans, you may want to consider refinancing your debt before rates rise further.
If you do qualify for forgiveness and you refinance your entire federal student debt, you will no longer qualify for the new program. If you still wish to refinance, leave up to $10,000 unrefinanced ($20,000 for Pell Grant recipients) to receive your federal benefit. Remember: Good information is your best weapon when it comes to managing all aspects of student debt.
What are common types of student loan forgiveness scams?
Look out for false email alerts claiming to be from the government and phony government websites. These schemes attempt to get you to divulge personal financial information, which can then be used for identity theft and other financial fraud. Other scammers are offering unnecessary forgiveness application help for a costly upfront fee.
How can I avoid falling victim to a student loan forgiveness scam?
Information is your best defense. Sign up for government alerts and notifications, and keep an eye on advice from official outlets. Also, make sure your contact information is current with both the government and your loan servicer.
Does everyone eligible to receive student loan forgiveness need to fill out an application?
No. If your income information is already on file with the Department of Education, you will not need to apply for student loan forgiveness. You’ll receive it automatically.
SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended to December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit. CLICK HERE for more information.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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