Recently, many student loan borrowers have complained to the Consumer Financial Protection Bureau (CFPB) about companies that promise hundreds or thousands of dollars in fee relief or deferrals. Borrowers believe they are talking to a servicer or company authorized by the Department of Education because they often know private information about the borrower, such as the borrower’s loan balance or recent consolidation activity. This is fraudulent.
Legal options for getting rid of federal student loans starting in August 2022:
- Loan forgiveness is not currently available to all student borrowers, but there are plans to forgive federal student loans for certain borrowers, such as public servants, and to forgive loans in other circumstances. On August 24, 2022, the administration announced that borrowers with federal loans and incomes less than $125,000 (individuals) or $250,000 (married couples or families) can apply for up to $10,000 in student debt forgiveness, or up to $20,000 if they received a Pell Grant in college. Learn more about the Biden-Harris Administration’s student debt forgiveness plans.
- Federal student loan servicers are not allowed to charge you a fee to apply for loan forgiveness, income-driven repayment (IDR), deferment or forbearance, or to submit any other documentation. Federal loan servicers do not charge an application fee or processing fee to consolidate your federal loans into a Direct Consolidation Loan.
- The CARES Act moratorium on federal student loan payments and interest has been extended through December 31, 2022. Eligible loans will automatically be in deferral. No one will contact you to sign up for the CARES Act deferral. There is no fee to sign up for the CARES Act deferral. If your payments are too high at the end of the deferral, contact your carrier directly to learn about payment relief options. Your federal loan servicer will not charge you any application or processing fees to help you switch to a different repayment plan (such as an IDR plan) or to sign up for any available deferral or payment deferral options.
In addition to filing complaints with the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC), consumers are encouraged to learn how to recognize these scams and how to report the scammers to the authorities.
Here are some red flags to watch out for:
Charge upfront fees for free items
Scammers often try to claim programs that are free to all borrowers, including document preparation. Loan forgiveness or forgiveness (as long as these programs are available to you), loan consolidation, student loan deferment and extension are all free programs offered by service providers. If a company asks you to pay a large sum of money upfront, it is likely a scam and should be reported. Do not give the company any money or personal information. Contact your loan servicer to determine what your options are. You can find out who your service provider is by logging into your federal student aid account or calling 1-800-433-3243.
Pressure to make quick decisions
Scammers may tell you that you only have 24 hours to take advantage of an offer or program. This is a red flag. Most programs offered by the government don’t require this sense of urgency. Before taking any other action, confirm that this is a legitimate company.
Encourage you to cut off communication with your loan servicer
This is a warning sign that the company is not working in your best interest. As a student loan borrower, it is very important to maintain communication with your servicer. If someone urges you to pay their company instead of your loan servicer or to stop communicating with your loan servicer, do not give them any information. Do not stop paying your service provider.
Claiming to be affiliated with your loan servicer or the Department of Education
Scammers may reveal the name of the institution where you have a loan account. Be wary of statements such as “we work with the Department of Education” or “we work with your loan servicer.” If someone contacts you and claims to have a partnership with your loan servicer, hang up and contact your loan servicer directly to confirm. Call the number provided on your account statement or through your service provider’s portal. Do not use the contact information provided in an email or voicemail.
Sometimes your student loan servicer will contact you about state loan forgiveness (PSLF). As part of a recent settlement with the CFPB, federal student loan servicer Edfinancial must contact all of its Federal Family Education Loan Program (FFELP) borrowers to inform them of limited PSLF forgiveness so that eligible borrowers can receive it before it expires.
Asking for personal information by email or phone
Scammers will often ask for your personal information, such as your full Social Security number, bank account number, FSA ID, or studentaid.gov password. Never provide any personal information to an unverified company over the phone. If you suspect the caller may be a scammer, hang up and contact your servicer directly to determine if any action is required on your loan. If you have provided a scammer with your personal information, we have listed some tips below to avoid scams.
If you are contacted or deceived by a scammer
- Cancel the payment. If you realize this after the fact, work with your bank to cancel or block your scheduled payment. Your bank should have policies in place to help you avoid future fraudulent activity.
- Contact your service provider. They can help you protect your account. If you signed a letter of authorization authorizing the scammer to communicate with your service provider on your behalf, revoke that letter of authorization.
- File a report with the Federal Trade Commission (FTC) . In addition to reporting your complaint to the FTC, you can also contact the Department of Education’s Office of Inspector General.
- Contact a government official. Notify your state’s attorney general. Contact the state loan ombudsman, if there is one.
For more information about student loan scams and actions taken by the Bureau and the Federal Trade Commission against scammers, see the 2019 Education Loan Ombudsman Annual Report.
