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As the resumption of student loan payments looms after a prolonged three-year hiatus, the uptick in complaints about fraudulent student debt relief schemes has become alarming. This article delves into the intricacies of this issue, covering the convoluted policy landscape and the tactics employed by scammers. It offers valuable insights to empower borrowers to protect themselves against these scams.
The Complex Policy Landscape
The Biden administration’s sincere attempts to ease the burden of student loans have encountered legal challenges, adding to the confusion surrounding student debt relief. The impending restart of loan payments has created a breeding ground for misinformation and exploitation by unscrupulous entities.
Dan Zibel, co-founder and Chief Counsel of Student Defense, a nonprofit dedicated to safeguarding student rights, highlights the barrage of policy and legal developments in recent years. “There is news about repayment plans, cancellation, different types of cancellation, whether it’s public service loan forgiveness or fraud-based cancellation, the COVID pause, and then the courts get involved,” he explained. “Debt forgiveness is happening. Debt forgiveness is not happening. There’s new debt forgiveness… I think that sows confusion for a lot of people.”
Vulnerable Borrowers Under Threat
The situation becomes even more critical, with a staggering 44 million borrowers collectively owing over $1.7 trillion in student debt. This leaves many susceptible to falling victim to scams that promise relief.
Typically, these scams begin with a simple telemarketing call. In exchange for a fee, callers promise to alleviate debt burdens. They often request sensitive personal information and dishonestly claim affiliation with the U.S. Department of Education and student loan servicers. Some even mention “Biden Loan Forgiveness.”
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Surging Complaints
Complaints filed with the Federal Trade Commission (FTC) concerning student debt relief scams have steadily risen in recent months. The numbers have surged from 385 in June to 562 in July and 610 in August, reflecting the growing urgency as loan payments resume. In response, the FTC and the Department of Justice have taken substantial actions against scammers, returning millions of dollars to victims who paid upfront fees to companies like Ameritech Financial and Arete Financial Group, which falsely promised federal loan assistance.
Combating Deceptive Calls
To counter illegal telemarketing calls, the FTC is actively collaborating with law enforcement agencies and attorneys general. Some scams involve impostors posing as government or business entities, a tactic that deceives unsuspecting student loan borrowers.
Ongoing Efforts
The Biden administration has made multiple attempts to alleviate the burden of student loan debt. One notable effort was a program announced in August 2022 that could have canceled up to $20,000 of federal student loans for eligible borrowers. However, the U.S. Supreme Court ruled against the plan in June, leading to the introduction of the SAVE Plan. This new income-driven repayment program offers benefits such as zero monthly payments for some low-income borrowers and early student loan cancellation for others. Students defrauded by for-profit colleges continue to receive loan cancellations as well.
Safeguarding Oneself
These scams target vulnerable borrowers, including those facing economic hardship or language barriers. However, even individuals who consider themselves savvy can fall victim to increasingly sophisticated schemes. Kyra Taylor, a National Consumer Law Center staff attorney, warns that scammers have become adept at spoofing student loan servicer emails, making it challenging to discern genuine communications from fraudulent ones. Therefore, it’s crucial for anyone, especially those receiving seemingly legitimate emails from their student loan servicers, to exercise caution when confronted with these deceptive tactics.
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