Consumers have been alerted to expect increased scams focused on student loan beneficiaries, following the Supreme Court’s decision to overturn parts of the debt forgiveness scheme proposed by President Joe Biden. This warning also aligns with the fast-approaching reinstatement of repayments.
The warning came from the Better Business Bureau (BBB) on July 14, a non-profit entity that advocates for consumers. The Bureau foresees a sharp rise in fraud linked to student loan consolidation, reduction, and forgiveness, with some victims already losing thousands of dollars.
The BBB’s Director of Public Relations, Melanie McGovern, briefed Newsweek that most of the reported scams happened via phone calls. The decision to raise this alarm was prompted by current news events that could serve as a breeding ground for scammers.”
As the country grappled with the financial implications of the COVID-19 pandemic, President Biden made the move to suspend federal student loan repayments and promised some debt alleviation for the 43.6 million debtors.
Consumer advice experts are cautioning about likely spikes in scams targeting student borrowers.
A stock image illustrating a student loan application and one-hundred dollar bills.
Image Credit: JJ Gouin/Getty Images
The president initially proposed to reduce the debt of eligible student borrowers by a minimum of $10,000. However, the plan was shut down by the lower courts, leading to the final appeal. Just before the summer break, the Supreme Court sided against the debt forgiveness clause of the proposed scheme. As a result, the government settled for a lesser version of Biden’s original plan, announcing plans to cancel $39 billion in debt for 804,000 borrowers through a different legal means.
As the official pandemic emergency draws to a close, loan repayments are due to commence in October. However, the Biden administration remains committed to making the repayment process more manageable.
On July 3, BBB received a report from a teacher who fell victim to a loan forgiveness scam. A company from Anaheim, California, reached out to the teacher over the phone, persuading them to part with their payment card and social security details by promising loan forgiveness. This resulted in a monthly deduction of $199 from the victim’s account until December. The company promised the deduction would reduce to $80 per month by 2023.
The victim only noticed in February that the monthly deductions ended in December, and there was no further communication from the company. Although they reported to their bank, they couldn’t get a full refund, losing a total of $1,200 in the process.
In a similar report on Monday, another individual lost $520 due to deceptive phone calls from a company in Syosset, New York, using high-pressure sales tactics and promises of student loan forgiveness.
These reports form a small fraction of loan-related scams received by BBB. However, as the loan repayment deadline approaches, the consumer advice body predicts such scams could become more frequent.
Be Informed, Stay Alert
The BBB urges consumers to do due diligence before sharing information and money in anticipation of debt forgiveness, as such an idea often persuades many people to share personal information without thinking critically about potential ramifications.
Among other precautions, BBB advises consumers to exercise caution when contacted out of the blue by text, calls, or emails claiming to represent the government. Consumers should avoid paying money for free government programs and be wary of sharing personal information.
BBB also encourages consumers to explore relief programs offered by their current student loan providers. According to McGovern, most providers are accommodating, given the prevailing circumstances.
BBB noted a dramatic surge in text scams, with over 330,000 cases reported since 2020, a sharp increase from 137,000 cases in 2019, according to figures from the Federal Trade Commission. While most reports pointed to phone calls as the common medium, scam attempts were also conducted through other means.
BBB reached out to the Federal Trade Commission, one of the primary entities responsible for scam monitoring, for comments.
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