Student loan forgiveness scams are on the rise. Here’s what you need to know

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Weeks after applying for government loan forgiveness, a federal program that forgives student loan debt for eligible workers, Kathleen Young received a phone call.

The woman on the other end of the line said she could help Young to forgive student debt. Young, an elementary school teacher in Palo Alto, California, suggested it was a call from the US Department of Education about a public service program.

She checked her social security number and gave the woman her bank account information for registration, which she was told would consolidate her loans and forgive them after 60 payments (120 qualified payments are required to forgive a government service loan). She was informed that she would see her. the first payment was withdrawn from her bank account after about 10 days.

However, she later realized that something was wrong. She found Guidance Alum who called her and saw that she was not affiliated with the Ministry of Education and had several complaints, including Better Business Bureau, about their services

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“They received all this information from me, and I realized that they [the Education Department] I would never have asked for this information over the phone, ”Young said. Leadership alumni did not respond to CNBC’s request for comment.

She was able to close the bank account she provided to the company and sent Guidance Alum a formal cancellation request. She now has several services that track her social security number, which she will keep for the rest of her life, she said.

A few weeks later, she received an email from FedLoan Service, a service staff who is currently implementing a public service loan forgiveness program for the Ministry of Education and was able to sign up and start paying for forgiveness.

However, she said she felt terrible about falling in love with something that wasn’t necessarily booming.

“You know, they say retroactively 20/20,” she said. “I didn’t think this could ever happen, but the red flags were there.”

Young is not alone. Demands from companies offering student loan cancellations have increased in recent months, which may be fueled by the pandemic-related suspension of federal loan payments and interest and widespread forgiveness.

“This is kind of a headline scam because I think they are capitalizing on the confusion that surrounds what’s going on with student loan policies and potential forgiveness,” said Bridget Hale, Head of Borrower Relations at Summer. a company that helps borrowers simplify and save on their student debt.

The coronavirus pandemic has also given scammers more opportunities to take advantage of people who have been financially affected over the past year and a half.

“Scammers are indeed targeting financially vulnerable people, which is why many people are struggling financially and seeking financial help in the wake of the pandemic,” said Kristen Evans, Head of Students and Young Consumers at the Consumer Financial Protection Bureau. “It just creates an ideal breeding ground for scammers who can exploit people.”

How to recognize and avoid fraud

According to Evans, the best way to protect yourself from fraud is to prevent it. Because of the current conditions, people must now have a high degree of skepticism, she said.

There are several key points to look out for if people receive a phone call or a student loan forgiveness letter.

According to Evans, people should not think that if someone has information about their student loans, such as the overall balance sheet, it means that they are working legally.

“We know that scammers illegally obtained credit reports and then use this information,” she said.

Look for the name of the program you are offered – some of the scams imply that they are part of Biden’s Loan Forgiveness or CARES Loan Forgiveness, two programs that don’t exist, Evans said.

This is kind of the best time to get scammed because I think they are capitalizing on the confusion that surrounds what goes on with student loan policies and potential forgiveness.

Bridget Hale

Borrower Success Manager for Summer

If you receive a suspicious email, make sure it was sent from an email address that ends in “.gov”.

Remember, federal programs do not require an additional payment for loan forgiveness, so if someone talks about charging you a fee, that should be an immediate wake-up call, Hale said.

She also said that you need to be extra careful with anyone who asks for your personal information, such as your Social Security number, federal student aid card, credit card, or bank account – this information should usually either be logged into a secure portal. or by phone. service staff.

If you think something might be a scam, or have any doubts, the best course of action is to contact your service agent directly, as Hale and Evans said.

What to do if you are a victim

If you are the victim of a scam and have passed on sensitive financial information, you need to act immediately to protect yourself from further damage.

If you have provided a scammer with your credit card or bank account information, immediately call your bank or card company to close your accounts or stop payments.

You should also call Student Loan Services, especially if you have provided information such as your Federal Student Aid ID so they can monitor your account.

“You can also check your credit report to make sure there is no suspicious activity,” Evans said.

What to do if a scammer contacted you

If you receive a suspicious phone call, voicemail, or even an email that you believe is fraudulent, you do not need to take immediate action if you have not responded or provided any personal information.

“You absolutely don’t have to do anything, if you don’t give them any information, everything will be fine,” Hale said.

However, you can report this. One option is to file a complaint with the FTC, notifying it of potential fraud. Another is to call your state’s attorney general.

Finally, you can also check your credit score out of caution, Evans said.

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