Beware of Scammers Trying to Capitalize on Student Loan Forgiveness

Shady callers are acting quickly on President Biden’s announcement last week to cancel up to $20,000 in federal student debt for millions of borrowers. As Americans await more details about the plan, these callers are already dialing consumers, misleadingly warning them that time is running out.

The debt cancellation program is providing grist for scammers seeking to separate people from their money, their personal information, or both, consumer advocates say. The calls may be targeting student borrowers — or they may be fishing expeditions preying on consumers even if they don’t hold education debt.

“Scammers read the news, too,” said K. Michelle Grajales, a lawyer with the Federal Trade Commission.

In a voice mail message reviewed by The New York Times, a female caller claimed to be from “student support.” The person who received the call does not have student loans. But the caller said the individual was “prequalified” for “updated forgiveness,” before cautioning that “it does look like your status will expire soon.”

Mike Pierce, executive director of the Student Borrower Protection Center, an advocacy group, said he has received at least two calls in recent days, even though he holds no federal student loans. “They’re not wasting any time,” he said.

What to Know About Student Loan Debt Relief

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What to Know About Student Loan Debt Relief

Many will benefit. President Biden’s executive order means the federal student loan balances of millions of people could fall by as much as $20,000. Here are answers to some common questions about how it will work:

What to Know About Student Loan Debt Relief

Who qualifies for loan cancellation? Individuals who are single and earn $125,000 or less will qualify for the $10,000 in debt cancellation. If you’re married and file your taxes jointly or are a head of household, you qualify if your income is $250,000 or below. If you received a Pell Grant and meet these income requirements, you could qualify for an extra $10,000 in debt cancellation.

What to Know About Student Loan Debt Relief

What’s the first thing I need to do if I qualify? Check with your loan servicer to make sure that your postal address, your email address and your mobile phone number are listed accurately, so you can receive guidance. Follow those instructions. If you don’t know who your servicer is, consult the Department of Education’s “Who is my loan servicer?” web page for instructions.

What to Know About Student Loan Debt Relief

How do I prove that I qualify? If you’re already enrolled in some kind of income-driven repayment plan and have submitted your most recent tax return to certify that income, you should not need to do anything else. Still, keep an eye out for guidance from your servicer. For everyone else, the Education Department is expected to set up an application process by the end of the year.

What to Know About Student Loan Debt Relief

When will payments for the outstanding balance restart? President Biden extended a Trump-era pause on payments, which are now not due until at least January. You should receive a billing notice at least three weeks before your first payment is due, but you can contact your loan servicer before then for specifics on what you owe and when payment is due.

In fact, nefarious callers have had ample time to prepare, since talk of student loan forgiveness has been percolating since Mr. Biden proposed it during the 2020 presidential campaign. Payments on most federal student loans were first temporarily suspended in March 2020, early in the pandemic, by the Trump administration. Mr. Biden extended the pause several times, and payments are now scheduled to resume after Dec. 31.

Even before the president’s recent action on loan forgiveness, scams based on the premise of securing help with student debt have kept federal regulators busy. Scam callers use the existence of legitimate, but often confusing, federal programs that can reduce monthly payments or forgive student debt, like the public service loan forgiveness option, to trick borrowers into paying illegal fees or sharing sensitive information. The F.T.C. has received nearly 49,000 complaints about student loans in the first eight months of this year, and about two-thirds of those were related to student loan debt relief, including scam calls, the agency said.

“Student debt cancellation is unprecedented, but these tactics are not new,” said Andrea Matthews, adviser to Rohit Chopra, the director of the Consumer Financial Protection Bureau.

Both the consumer bureau and the F.T.C. have taken action against student debt relief companies that persuade borrowers to pay up front for supposed assistance in reducing monthly payments or lowering their total debt.

In June, the bureau took action against the owner of a student debt relief company, accusing it of withdrawing hundreds of thousands of dollars from borrowers’ bank accounts without permission. Mr. Chopra said at the time that poor communication by servicers, the companies that collect payments for the loans, exacerbated the issue. “When student loan servicers don’t provide clear and accurate information to borrowers,” he said in prepared remarks, “it sets the stage for scammers to swoop in.”

The F.T.C. announced on Aug. 18 that it was mailing refunds totaling about $822,000 to thousands of borrowers deceived in one such illegal debt-relief scheme.

The F.T.C. has warned consumers that they don’t need to pay to sign up for the debt cancellation program, the loan payment pause, or a repayment plan tied to income. “Nobody can get you in early, help you jump the line, or guarantee eligibility,” it said, adding that anyone who says they can, or tries to charge you, is a “liar” and a “scammer.”

Borrowers should know that there is no rush to do anything immediately. If a caller suggests that you will miss out by not acting right away, demands money to help you or requests information like your Social Security number or your federal student aid ID, that’s a red flag.

More on Student Loan Debt Relief

  • A Hard Sell: At the White House and aboard Air Force One, advocates of debt cancellation made a sustained push to win over President Biden. Here’s how he finally gave in.
  • Limits Of Biden Tools: The student loan plan is the latest example of Democrats practicing the art of the possible on the nation’s most pressing economic challenges — and ending up with risky or patchwork solutions.
  • Who Will Benefit?: The big winners from Mr. Biden’s student loan plan are not rich graduates of Harvard and Yale, as many critics claim. It’s the middle class — and disproportionately young and Black people.
  • Snapping Back at Critics: In an aggressive turn, the normally staid White House Twitter account itemized hundreds of thousands of dollars in Covid-related debt relief given to House members who criticized the plan.

“When in doubt, don’t give information over the phone,” Ms. Grajales of the F.T.C. said.

Advocates for student loan borrowers recommend checking the Federal Student Aid website for official details about the debt cancellation program. The New York Times is also updating its information page about the Biden administration’s announcement periodically. And the Education Department offers tips online for avoiding student debt scams, whether they come by phone, email, or text.

Here are some questions and answers about calls targeting student borrowers.

What should I do if I get a suspicious call about student debt?

Hang up and contact your student loan servicer directly, Mr. Pierce said. If you don’t know who your servicer is, check If your loans don’t appear there, they are probably from private lenders and are ineligible for cancellation.

Scott Buchanan, executive director at the Student Loan Servicing Alliance, an industry group, said servicers generally don’t contact borrowers by phone unless they miss a payment. That could change once the Education Department finalizes a new plan on student debt forgiveness — but borrowers should end a call if they are leery. “We won’t take offense,” he said.

You can report improper calls to the F.T.C., the Consumer Financial Protection Bureau and the office of your state’s attorney general.

How will debt cancellation work?

About eight million borrowers may get cancellation relief automatically because the Education Department already has access to their income data. For everyone else, the White House says a “simple” application will be available by early October. You can sign up to be notified when the application is available on the Education Department’s subscription page. The Education Department did not respond to an email seeking comment.

Do I have to do anything to continue my loan repayment pause?

No, the suspension through the end of this year is automatic. Payments won’t resume before January, according to the Federal Student Aid website.

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