- Applications for President Joe Biden’s student loan debt relief plan are set to open in early October.
- It’s critical for borrowers to know signs of scams so they can safely get the relief they’re looking for.
- Student loan scammers aren’t anything new – but federal officials are warning people to be extra cautious.
With applications for President Joe Biden’s student loan debt relief plan right around the corner, federal officials are warning about scams.
On Wednesday, the White House shared its plans to crack down on student loan scammers nationwide. The administration also pointed to guidance for borrowers to avoid fraud in connection to the president’s one-time debt cancellation plan.
President Joe Biden announced in August that his administration would cancel $10,000 in student loan debt for federal borrowers with incomes less than $125,000 (or households earning $250,000), as well as $20,000 for Pell Grant recipients.
The program is expected to aid about 40 million people, the White House said. Borrowers can’t apply for forgiveness yet, but the application is expected to become available early this month.
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Scammers may try to take advantage of this moment, obtaining borrowers’ personal information to bilk people hoping for this debt relief, or worse, clean out their bank accounts. For borrowers who qualify for forgiveness, it’s critical to know signs of fishy phone calls and emails.
“Focus on getting information directly from the Department of Education,” K. Michelle Grajales, attorney for the Federal Trade Commission’s Division of Financial Practices, wrote in an alert this week.
Here’s what borrowers should know:
- Be wary of anyone who contacts you unsolicitedly and claims to be from a trusted agency. It’s best to reach out to Education Department yourself.
- Never pay anyone for student debt relief.
- Don’t share your personal loan information, especially not your FSA ID.
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Scammers often lie about being from the Department of Education
Do not trust unsolicited calls, emails or texts from someone who claims to be from the Education Department or your student loan servicer, the FTC said. Scammers who reach out to you often lie about being affiliated with trusted agencies.
If you’re unsure about who’s calling or emailing, hang up immediately or don’t respond. It’s safer to initiate contact yourself – using information from the Education Department or your loan servicer’s official websites.
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Never pay anyone for student loan relief help
Do not trust someone who contacts you and asks for money in exchange for their helping to have loans forgiven fast, the FTC and Education Department said. No one needs to pay anything to apply for this relief: The Biden administration’s federal student loan debt relief program is free.
The application is expected to go live online in early October, through the official Federal Student Aid website. It will later become available on paper. Borrowers can sign up for updates about the application using the Education Department’s website. Once released, borrowers will have until December 31, 2023 to apply.
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Some scammers will create fake applications to access borrowers’ savings.
“The ‘debt relief application’ they give you is sometimes a direct deposit or Power of Attorney form – which lets scammers start to taking money from your bank account,” Grajales writes.
Don’t share FSA login or other personal information
Never provide personal information about your loans with people who contact you out of the blue. Scammers might know some information about your loans, and will use it to gain your trust to get more details from you, the FTC says.
If you’re asked to provide personal information like your FSA ID username or password, for example, it’s a red flag. The Education Department and your loan servicer will never ask for your FSA password, the Education Department notes.
“If anyone says they need your FSA ID to help you, that’s a scam. Don’t do it,” Grajales added. “They can cut off contact between you and your servicer – and even steal your identity.”
Where should student loan scams be reported?
Use the FTC’s Report Fraud website.
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Contributing: Chris Quintana, USA TODAY.