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(From the Financial Literacy Blog) – On March 13, 2020, the U.S. Department of Education paused payments and set interest rates to 0% on federal student loans. Since then, if a borrower hasn’t been making any payments, they’ve been able to focus on other expenses without worrying about their balance increasing. With a 0% interest rate, their student debt balances have remained unchanged since the early days of the pandemic. If a borrower has been paying off their federal student loans, each payment has gone entirely to their principal balance. However, the student loan payment pause is scheduled to end on May 1, 2022. With that date looming in the not-so-distant future, scammers may be looking to prey on borrowers seeking student loan forgiveness. Here are five red flags to watch out for:
You’re Charged a Fee
There are legitimate loan forgiveness programs. However, eligibility for forgiveness is not fee-based. Instead, it’s often based on employment or other factors. For example, borrowers employed by a government or not-for-profit organization may be eligible for forgiveness after making 120 qualifying monthly payments. Student loans can also be discharged in the event of total and permanent disability, a school closure, and other rare circumstances. It’s also illegal for a debt relief service provider to request money before the service is carried out––even if they’re simply looking to help you consolidate or refinance your student loans. If a company requests a fee in advance, they’re fraudulent.
You Feel Pressured
Scam artists know that the longer you take to make a decision, the more time you have to research whether or not their services are legitimate. Fraudsters will try to rush you into offering up your credit card number or personal information before it’s “too late.” Promoting urgency or instilling the fear of missing out on a great offer is an immediate red flag. Instead, hang up the phone, close out your email—whatever it may be. Next, do your due diligence and research before pursuing any offers. Never commit to anything while feeling pressured and without adequately researching your options.
They Can’t Confirm Their Government Affiliation
Many companies use government logos and language in order to look like legitimate government resources. If contacted, look at the web address and see if it ends in “.gov” or not. If it doesn’t, the company is likely fraudulent. Further, keep an eye out for spelling or grammar mistakes, and plug any phone number listed into a search engine to see if it belongs to a legitimate government office or to a scammer. Legitimate government affiliates are also required by law to share general information with you, such as the amount you owe and the name of your lender or service provider. If they can’t, that’s another red flag––making it likely they’re phishing for personal information or payment.
They Request Your Personal Information
The U.S. Department of Education, student loan service providers, or government-contracted agencies will not reach out and then ask you to provide personal information, such as your Social Security Number, account number, date of birth, or your FSA ID number and password. If the entity requesting that information reached out to you, they would already have this information. Scammers can use this information to steal your identity. If you’re unsure if the organization is legitimate, do not interact with them until you’ve called your student loan service provider directly using the information on the servicer’s official website. They’ll be able to confirm whether they truly reached out to you or not.
It Sounds Too Good To Be True
As the popular saying goes, “If it sounds too good to be true, it probably is.” If you’re struggling to pay your monthly student loan payments, hearing about loan forgiveness programs can sound like a miracle. However, don’t let your emotions get the best of you. Student loan forgiveness is rare, and it is certainly not happening without prior notice and planning. If you’re eligible for a form of forgiveness, you should be following the steps on the Federal Student Aid website. If an offering for student loan forgiveness seems very abrupt, it’s likely a scam.
If you’ve fallen victim to a student loan forgiveness scam, contact your credit union or credit card company immediately. They may be able to reverse the charges or put a freeze on your account. Next, go to the FSA website and change your FSA ID. Place a freeze on your credit report to ensure the scammers can’t open new lines of credit union in your name. You can also file a report with the Federal Trade Commission and notify the Consumer Financial Protection Bureau, which will help others avoid becoming a victim.
If you have questions about budgeting for your upcoming student loan payments in May, contact your local credit union.