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Are Those Student Loan Forgiveness Calls Real? Here's What You Need to Know to Avoid Getting Scammed

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Student debt is a nationwide plight, one that has an impact on 42.9 million Americans (that's one in eight people), according to the Department of Education's most recent report. As a nation, we carry a total of $1.71 trillion of student debt nationwide—at an average of $37,693 each, according to recent reporting by EducationData.org. This means, of course, that it takes decades for borrowers to pay off the principal and the accrued interest.

Whatever your stance when it comes to loan forgiveness, the fact that this form of debt dominates a huge swath of the United States population is indisputable. And those who carry student debt aren't only 22-year-old college grads; they're also middle-aged and older adults. While, according to the report, 25- to 34-year-old Americans are the largest group of borrowers (14.9 million people, who hold a collective $500.6 billion in debt) and 35- to 49-year-old Americans hold the largest amount of debt total ($613 billion in debt, held by 14.3 million people), there are still 2.4 million people over 62 who owe a collective $92.7 billion in student debt. In other words: There are millions of grandparents out there who are still paying off the cost of their higher education.

The COVID-19 pandemic brought a sense of urgency to the issue of student debt. With unemployment rates skyrocketing in the wake of lockdowns, the federal government halted all student loan payments (on federal loans) back in March of 2020. Over a year later, the latest jobs report from the Bureau of Labor Statistics (BLS) describes an economy that's beginning to heal. In the spirit of this rejuvenation, the Biden administration has announced that loan payments will resume in February of 2022—nearly two years after the initial suspension.

President Biden has gone on record promising to make all the student debt go away, and there has been some movement in that direction. Back in April, the Secretary of Education began exploring 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. None of these has come to fruition just yet.

In the meantime, all of this financial uncertainty has provided ample opportunity for scammers to lay waste to unemployed borrowers who are desperate to make ends meet. "Anecdotally, we're hearing more about [these scams]," says Eva Velasquez, president and CEO of the ID Theft Resource Center. "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."

Velasquez explained that these scams are especially evident over social media, but also come in the form of unsolicited phone calls and text messages from bad actors. Many experts assure that legitimate loan services will never call or text a borrower out of the blue, so that's one easy way to recognize a scam when you see one. There are, unfortunately, more insidious traps out there, just waiting for the right person to take the bait.

These are the main types of student loan scams.

"One major red flag is if someone is trying to charge you a fee in exchange for loan forgiveness," says Rebecca Safier, a Student Loan Counselor with Student Loan Hero. "Legitimate loan forgiveness programs will cancel part or all of your student loan debt, but they won't charge you a fee to do that." Safier went on to explain that there are legitimate financial counselors that charge a fee to make a financial plan for repayment, but there's nothing that they're doing that a borrower can't do on their own, for free. "You can apply for the repayment plan [and] you can pursue loan forgiveness on your own," she says.

Also, Safier was clear about student loan forgiveness being an involved, lengthy process. "If someone says, 'pay us this amount, and we'll get rid of your student loans,' that's definitely a red flag and probably a [...] scam," she says.

Another common scam has to do with loan consolidation. "Student loan consolidation is a free service offered by the Department of Education, but companies will charge you $1,500 to consolidate your loans when it's a free service," says Robert Farrington, founder and editor-in-chief of The College Investor.

It can be even worse. It's one thing if a company charges you for a service that's actually free. But what if someone says they'll consolidate your loans and actually does nothing at all? "That's where you see borrowers end up in more hurt than they were at the start of the process," says Farrington. "Their student loans [may be] verging on default."

There are also companies that make claims about negotiating repayment or forgiveness of student loans owed to private lenders. These pseudo law firms encourage borrowers to send their loan payments to them instead of to the lender, stating that they'll keep those funds safe and that this will make the lender more inclined to negotiate repayment terms. Once they've got all that money, though, the firms disappear like morning's mist, taking it with them.

Scammers may also be trying to access a borrower's personal identifiable information (such as a SSN or bank account number) in order to steal money or, worse, an identity. Or, they may request a borrower's FSA ID—the unique login to the federal student aid website. If the borrower hasn't been careful about using unique passwords, scammers can use those credentials to steal social media accounts, email accounts, and more.

"When people are so burdened by this financial albatross around their neck, they become desperate to get out from under it, and the risk aversion lowers, because the reward [...] could be so good," says Velasques. People may believe that they have nothing left to lose, but Velasquez is adamant that borrowers have "an awful lot to lose. It really depends on how you engage with this scammer."

Here's what to do if you've been scammed.

The first thing to know about being scammed is that it happens to everyone, and doesn't mean anything about a person's abilities. Tricksters and thieves are honing their skills and coming up with new tactics every day, so there's no shame in clicking the wrong link or answering the wrong text. If someone has fallen victim, the next steps will depend on what, exactly, the losses look like.

"There is no risk minimization or recovery program that's suitable for all circumstances," says Velasquez. If a person's SSN has been compromised, the first step is to freeze their credit so that no new lines of credit can be opened in that person's name. If a scammer gets a person to create a new username and password, and that person has used the same password elsewhere, the next step is to change it on all other websites.

It's not likely that someone who has been scammed will recoup their funds, unless it's possible to cancel a credit card charge or a bank transfer before it goes through. "If you paid them in Bitcoin, or a wire transfer, or a money order, or gift cards, the reality is you're not going to be able to recover that money," said Velasquez.

Beyond these avenues of protection, it's also possible (and recommended) to file a complaint with your state's Attorney General as well as with the Consumer Finance Protection Bureau (CFPB). While these avenues aren't likely to take action on individual cases, the more complaints they receive, the more possible it is that they may shut down nefarious companies.

Do opportunities for loan forgiveness really exist?

"It's important to know that, with federal student loans today, we estimate that about 50 percent of all borrowers already qualify for some type of loan forgiveness program," says Farrington. "There's a lot of options out there for help with your student loans."

One such opportunity is Public Service Loan Forgiveness. "If you work in public service for 10 years, you get your loans forgiven, tax-free," says Farrington. This option does take time, though, and it entails paperwork—a borrower has to file papers (the employer certification form) signed by their employer and HR representative proving that they do, in fact, work for a qualifying organization. According to Farrington, some scammers may reach out and offer to file this paperwork for you, for a price, despite the process being completely free to borrowers. Additionally, scammers may say they're filing the paperwork but not follow through, leaving a borrower even worse off than they were.

Another possibility is Teacher Loan Forgiveness, a process that takes five years to complete. These years of working as a teacher must be consecutive, and they must be completed at a qualifying educational program.

Beyond these options, the federal government offers other routes to mitigate the burden of student debt. These may include serving in the U.S. military or working with AmeriCorps, as well as enrolling in an income-based repayment program. For loans from private lenders, there aren't many forgiveness options, and these will depend on the specific lender you're working with.

The bottom line when it comes to avoiding these pitfalls is threefold. First, if you haven't reached out to a lender, then that person calling, texting, or posting ads on social media is probably trying to trick you into something that's bad for you. Second, all forgiveness programs can be done for free, but they take time. Reading up on legitimate websites will get you all the information you need to apply for them.

Third, and most important: Knowledge is power. By educating yourself on the options, you'll be able to sidestep any possible dangers with ease. It's a scary world out there, but with the right tools at hand, we can all stay safe.