Student loan borrowers should be aware of scams ahead of a key deadline next week.
Why It Matters
The Trump administration plans to resume forced collections on student loans that are past due. The resumption of payments is expected to affect more than 5 million borrowers who are in default, the Education Department said, adding that another 4 million borrowers are late in making payments. The move ends a yearslong pause in forced collections that began during the coronavirus pandemic.
When Do Student Loan Collections Resume?
Borrowers who are in default will need to arrange a payment plan or sign up for loan rehabilitation with the Education Department by May 5. If repayments are not made, borrowers could face wage, tax refund and benefit garnishment. They could also take a nasty hit to their credit score.
Student Loan Scams
As the deadline approaches, the incidence of scams is likely to rise.
In 2022, scammers defrauded $5 billion from Americans in student loan-related scams, according to estimates from RoboKiller, an app that blocks spam calls.
Elaine Rubin, a student loan policy expert, has said borrowers should be wary of student loan scams that offer to reduce monthly payments, get their debt canceled or make sure their wages aren’t garnished.
“All the noise, the concern and the fear starts to bring about more predatory or scam companies to contact borrowers to offer them an ‘easy way out,’” Rubin told CNET.
“There is a risk that predatory companies could be more predatory in this type of environment,” she added. “It’s always important to be on top of what’s going on and understanding how it directly impacts you.”
The Education Department’s Federal Student Aid (FSA) office offers the following examples of scam messages:
- “Act immediately to qualify for student loan forgiveness before the program is discontinued.”
- “You are now eligible to receive benefits from a recent law that has passed regarding federal student loans, including total forgiveness in some circumstances. Federal student loan programs may change. Please call within 30 days of receiving this notice.”
- “Your student loans may qualify for complete discharge. Enrollments are first come, first served.”
- “Student alerts: Your student loan is flagged for forgiveness pending verification. Call now!”
Here are some other key signs you may be on the cusp of being scammed:
- They charge up front or monthly fees. Legitimate help is free through your federal loan servicer. Never pay before services are provided or share your bank information.
- They promise immediate loan forgiveness. No company can guarantee instant or total forgiveness. Real programs offered by the Education Department require years of qualifying payments or service.
- They ask for your FSA ID and password. Never share your FSA ID credentials—this allows others to access and change your loan info without consent.
- They want a power of attorney or third-party authorization. This lets others control your loan account and hide that they’re not making payments.
- They pressure you to act fast. Scammers use fake urgency or deadlines. Federal loan programs aren’t limited by time, only by eligibility.
- Their messages have grammar or spelling errors. Poor writing is a common scam sign, even if the communication looks official.
If you believe you may have fallen prey to a scam, you should contact the Federal Trade Commission and the Consumer Financial Protection Bureau. The Education Department also has a fraud hotline that can be reached via its website.
The post Student Loan Debt Scams to Avoid Ahead of Collections Date appeared first on Newsweek.
