Recently, there were a number of students who have federal student loans and they said that they got phone calls from someone who said that they offer student loan forgiveness. Is this true? Well, you have to be careful because it may be a scam so you have to know the signs if it is a scam.
According to the Real Simple site, here is the explanation about Federal Student Loan Forgiveness program phone calls. It is explained that student debt is a nationwide issue which gives an impact on 42.9 million Americans according to the Department of Education’s most recent report. The country carries a total of $1.71 trillion of student debt nationwide where it is at an average of $37,693 each according to recent reporting by EducationData.org. The meaning is that it needs decades for borrowers to be able to pay off the principal and the accrued interest.
President Biden has noted a promise to delete all the student debt and there has been some movement in that direction. In April, the Secretary of Education started to explore the legality of forgiving $10,000 of student loan debt through executive action. In February, Senator Elizabeth Warren and Senate Majority Leader Chuck Schumer proposed a resolution that would forgive $50,000 of debt through executive action. However, there is none of these which has come to fruition just yet.
This financial uncertainty has given many chances for scammers to lay waste to unemployed borrowers who are desperate to make ends meet. Eva Velasquez, president and CEO of the ID Theft Resource Center said, “Anecdotally, we’re hearing more about [these scams]. When [they] first start proliferating, it takes a while to catch up with reporting, but we’re certainly hearing more from people getting the solicitations.”
Eva Velasquez gave an explanation that these scams are especially seen over social media, but also come in the form of unsolicited phone calls and text messages from bad actors. There are a lot of experts who assure that legitimate loan services will never call or text a borrower out of the blue. So, that is an easy way to know a scam when you see one. However, you also need to be careful because there may be more insidious traps out there.
The Main Types of Student Loan Scams
According to the Real Simple site, here is the explanation about the main types of student loan scams.
Rebecca Safier, a Student Loan Counselor with Student Loan Hero said that One major red flag is if someone is trying to charge you a fee in exchange for loan forgiveness. She also said that legitimate loan forgiveness programs will cancel part or all of your student loan debt, but they will not charge you a fee to do that. Then, Rebecca Safier furthermore said that there are legitimate financial counselors that charge a fee to make a financial plan for repayment, but there is nothing that they are doing that a borrower cannot do on their own, for free. She also said that you are able to apply for the repayment plan and you are able to pursue loan forgiveness on your own.
Rebecca Safier also said that student loan forgiveness is an involved and lengthy process. If there is someone who says that you have to pay them this amount and they will get rid of your student loans, that is definitely a red flag and probably it is a scam.
There is also another common scam with loan consolidation. Robert Farrington, founder and editor-in-chief of The College Investor said that student loan consolidation is a free service which is offered by the Department of Education, but companies will charge you $1,500 to consolidate your loans when it is a free service.
There are also companies which make claims about negotiating repayment or forgiveness of student loans owed to private lenders. These pseudo law firms push borrowers to be able to send their loan payments to them instead of to the lender and they state that they will keep those funds safe and that it will make the lender more inclined to negotiate repayment terms. After they have got all that money, the firms go away.
Scammers may also try to access the personal identifiable information of a borrower such as a SSN or bank account number to be able to steal money or an identity. They may also ask the FSA ID of the borrower so that the scammers can login to the federal student aid site. If you are not careful about using unique passwords, scammers are also able to use those credentials to steal social media accounts, email accounts and more.
Chances for Loan Forgiveness Really Exist or Not
As explained on the Real Simple site, here is the explanation about whether chances for loan forgiveness really exist or not. Farrington says that it is important to know that, with federal student loans today, they estimate that about 50 percent of all borrowers already qualify for some type of loan forgiveness program. It is also said that there are a lot of options out there for help with your student loans. One of the opportunities is Public Service Loan Forgiveness. Farrington says that if you work in public service for 10 years, you get your loans forgiven, tax-free. However, this option does take time and it needs paperwork where a borrower must file papers (the employer certification form) signed by their employer and HR representative which prove that they do work for a qualifying organization.
Farrington says that some scammers may reach out and offer to file this paperwork for you for a price, even though the process is completely free to borrowers.
There is also another possibility namely Teacher Loan Forgiveness. It is a process that takes five years to complete. The years of working as a teacher need to be consecutive and they need to be completed at a qualifying education program.
The federal government has an offer beyond these options to mitigate the burden of student debt. Those may include serving in the U.S. military or working with AmeriCorps and also enrolling in an income-based repayment program.
How about loans from private lenders? There are not many forgiveness options and these will depend on the specific lender that you are working with.