Watch Out for Student Loan Repayment Scams

In June of this year, the Supreme Court rejected President Biden's proposal to forgive up to $20,000 in federal student loan debt for eligible borrowers. Consequently, millions of student loan debtors are expected to commence repayment of their loans in October, following a three-and-a-half-year delay.

Scammers and fraudsters have already initiated the process of exploiting vulnerable borrowers by assuming the identity of legitimate debt relief organizations and offering to assist them in repaying their loans. A significant number of them employ aggressive strategies, make false claims, and impose arbitrary fees. Fortune 500 companies may contact you with an offer of assistance if you are preparing to repay your student loans. Here are a few indicators that you may be the victim of a student loan repayment fraud before you take any action.

Up-front or monthly fees

Student loan repayment schemes frequently attempt to impose an upfront or monthly fee for programs that are typically accessible for free. It is crucial to bear in mind that there is no obligation to compensate anyone for their assistance in managing student loans. Most loan servicers provide free programs, including consolidation, forbearance, deferment, discharge, and absolution, for student loans.

High-pressure tactics

Scammers may employ high-pressure tactics to induce you to participate in an offer or program. They may advise you to take immediate action or inform you that your student loan has been flagged. They may also issue legal threats or garnish your wages. When contacting you regarding your student loan repayment options, a legitimate company will never employ these types of aggressive tactics or pressure you to act swiftly.

False claims of affiliation

Scammers may also make false claims that they are affiliated with your loan servicer or an official organization, such as the U.S. Department of Education. Please refrain from utilizing the contact information supplied in an email, text, or voice message from an unknown sender, as it may be associated with a scam. Utilize solely the contact information that is specified on your loan servicer's website or billing statement.

Attempts to come between you and your loan servicer

Be wary of any organization that endeavors to constitute an intermediary between you and your loan servicer. Scammers may accomplish this by requesting that you communicate with them instead of your loan servicer or by instructing you to make your loan payments directly to them. Refer to your loan servicer whenever you are making payments on your student loans and contact them directly with any inquiries regarding your loans or loan repayment.

If you are ever the victim of a student loan repayment scheme, promptly notify your student loan servicer, the Federal Trade Commission act ReportFraud.ftc.gov, and your state's attorney general.

A critical yet underreported issue is the increasing targeting of retirees who co-sign for their grandchildren's student loans. As of a 2021 Consumer Financial Protection Bureau report, individuals over 60 are increasingly becoming co-signers to aid family members, making them susceptible to the same scams affecting younger borrowers. Scammers may exploit their lack of familiarity with the current student loan landscape. It's imperative for co-signers to be as vigilant as primary borrowers, verifying any solicitation through established communication channels with the loan servicer before responding to offers or demands related to loan repayment.

Navigating the student loan repayment landscape after the pause is akin to reopening a long-dormant factory. Just as a factory must restart its machinery carefully, checking for any signs of rust or malfunction that could sabotage its operations, borrowers must cautiously approach the resumption of payments, being vigilant for scams that could disrupt their financial health. Scammers, like industrial saboteurs, pose as helpful entities offering to assist with the complex machinery of loan repayment. They use tactics akin to offering counterfeit parts or false maintenance services that promise efficiency but instead endanger the entire system. Just as a wise factory manager would verify the credentials of any service provider and rely only on trusted and verified suppliers, borrowers must scrutinize any offers for loan repayment help, using only verified channels to communicate with their loan servicers. This cautious approach ensures that both the factory and the borrower's finances run smoothly without falling victim to costly disruptions...