US President Joe Biden delivers remarks regarding student loan debt forgiveness in the Roosevelt ... [+]
The good news is that loan forgiveness is here. The bad news is that so are loan forgiveness scams. The Biden administration plans to forgive $10,000-$20,000 in federal student loans for qualifying borrowers in the next few months. After months of deliberations, this is an excellent outcome for anyone struggling with student loans, especially the many borrowers who never completed a degree or credential.
Con artists and scammers are trying to exploit the media buzz around loan forgiveness. The Better Business Bureau (BBB) has already received hundreds of complaints about scams targeting student loan borrowers. If you type “student loans” into their scam tracker site, you get over 1,200 results.
Scams harm people hoping for some relief from their debt, so here are some tips to avoid falling prey to student loan scams.
What are some scam red flags to watch for?
The biggest red flag for scams is someone asking for a processing fee or advanced payment to help you complete your application. There is no application fee for President Biden’s loan forgiveness proposal. There will be some paperwork for many people, but anyone asking you to pay to apply is trying to steal your money. There are legitimate private companies that the U.S. Education Department contracts with — loan servicers, for example — but they will never charge you a fee for helping to provide information about your loans. You can always check whether a company works with ED by looking at the Federal Student Aid site on avoiding scams.
Scammers might also try to get private information like your social security number or bank information. If you get a call that seems to be legitimate, it is always best to verify the information with the federal agency in charge of the program.
If you come across a scam, you can help shut them down by reporting it to the BBB scam tracker above. The more people report scams, the easier it becomes to shut them down.
When will the Biden administration start providing debt forgiveness?
The Biden administration says that the application for student loan forgiveness will be available in early October. So, anyone calling, emailing, sending letters, or texting and trying to convince you that you need to apply today to have your debt forgiven is lying. You can use this federal website to sign up for notifications and receive updates once the application is available.
Many scams rely on creating a sense of urgency or the idea that you might miss out on something to get people to make rash decisions. This makes it hard to figure out what is a scam and what is a legitimate organization helping borrowers get help. There are real deadlines for certain programs that many legitimate organizations will be pushing borrowers to apply for over the coming months. The Public Service Loan Forgiveness waiver, for example, ends on October 31st, and there will be increased pushes for borrowers to apply before the easier application rules go away. There is also a major legal settlement forgiving loans for students from over 150 colleges that deceived students by promising false employment and earnings outcomes. Some students need to apply to be considered for forgiveness under the legal settlement — again, making it hard to know what is real and what is a scam. If you think you might have attended a college that is included in the settlement, you can find out more on the Project on Predatory Student Lending’s FAQ site.
As much as possible, it is best to verify any information with federal websites that end in a .gov web address. For broad debt cancellation, ED has said the application will be available until December 31, 2023. So, anyone saying you need to apply immediately, or you will miss out on forgiveness, is probably a scammer. There is no need to feel you will miss out if you wait an extra day or two to complete the application.
ED estimates they will be able to provide loan forgiveness to about $8 million borrowers automatically. Everyone else will need to apply.
Who is going to get forgiveness?
Students who received Pell Grants while in college will receive up to $20,000 in total forgiveness, with $10,000 in forgiveness for all other borrowers who meet the income criteria. Borrowers who earned less than $125,000 ($250,000 for couples) in either 2020 or 2021, will be eligible. This approach will focus 90% of the debt relief on households earning under $75,000 a year. The administration estimates the decision will eliminate debt for 20 million borrowers, with 43 million eligible for some amount of forgiveness. Not everyone will qualify for loan forgiveness, and not all debt will be forgiven. If you know that you do not qualify but are getting offers that seem too good to be true, they probably are.
Student loan forgiveness will provide a lot of relief to many borrowers. Hopefully, we can limit the number of people caught out by scammers trying to take advantage of the situation.
