The Federal Trade Commission has predicted an upswing in fraudulent activity targeting student loan borrowers. This comes after a Supreme Court decision nullified President Biden’s loan forgiveness initiative. The FTC anticipates scams to surge, exploiting borrower confusion when loan repayments resume in fall.
The FTC noted that scammers often exploit confusion following significant news events, as highlighted in a consumer alert issued recently. Scammers likely to peddle fake ‘assistance’ with loan repayments in the form of robocalls and texts, the alert warns.
President Biden’s nixed plan was poised to write off as much as $20,000 worth of federal student loans for multiple borrowers. Approximately 14 million peoples’ debts would have been cleared completely under this plan. Now, borrowers are being cautioned to brace for the resumption of their monthly repayments come October after a more than three-year-long interest-free pause.
President Biden, however, remains committed to pursuing other means of granting debt forgiveness. The restart of loan payments will come with a softer transition period of 12 months; during this time, the harshest repercussions of missed payments such as credit report black marks and default will not apply.
As we navigate this period, the FTC recommends looking out for three key red flags to avoid falling for student loan scams.
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1. Skepticism Towards Promises of Debt Relief or Loan Forgiveness
Scammers often cloak themselves in legitimacy, using official-sounding names, or even claiming an affiliation with the U.S. Department of Education. They’re known to promise exclusive access to non-existent repayment or forgiveness plans. The FTC suggests dismissing such offers, hanging up, and directly reviewing your options through your student loan account.
2. Guard Your FSA ID Login Data
Anybody requesting your Federal Student Aid ID with the promise to assist you is likely a scammer according to the FTC. Sharing this information could lead to severed contact with your service provider, or worst-case scenario, identity theft.
3. Decline offers of Paid Assistance with your Student Loans
Per the FTC, “Everything a company can do, you can do yourself for free”. For assistance, visit StudentAid.gov/repay or directly reach out to your loan servicer if your loans are private.
Frequently Asked Questions
What was the nature of Biden’s student loan forgiveness plan?
Originally, Biden’s plan aimed to exempt up to $20,000 in federal student loans for a large number of borrowers. An estimated 14 million borrowers would have had their loans fully removed.
What can I do to prevent falling for a student loan scam?
There are several cautionary steps. Don’t trust those who promise loan forgiveness, Do not share your Federal Student Aid ID, and do not pay for help with your student loans. You can manage and review your options concerning your loans for free.
What happens now that the student loan forgiveness plan has been nullified?
With the plan no longer in effect, borrowers need to prepare to resume their monthly loan repayments starting in October. There will be a buffer period where late payments won’t see the severest penalties applied, such as credit score damage and default.
