Student loan forgiveness scams are on the rise. How to protect yourself.
Financial schemes and scams were most often reported as the result of a phone call.
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If you receive an email, letter, or call about student loan debt cancellation, take a break before sending your personal information.
It could be a scam.
Amid increasing calls for large-scale student loan debt cancellation, pandemic-related federal loan payments paused and government wiping out balances for school borrowers Specific, corporate claims claiming to help people cancel their own higher education debt have ticked.
“This is kind of a prime time for scams because I think they capitalize on the confusion that surrounds what’s going on with the student loan policy and the potential forgiveness,” said Bridget Haile, Head of Student Success. borrowers at Summer, a company that helps borrowers simplify and save on student debt.
The coronavirus pandemic has also given con artists more ways to take advantage of people who have suffered financial harm over the past year and a half.
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“The crooks are really preying on the financially vulnerable and so with the pandemic, many people are struggling financially and looking for financial relief,” said Kristen Evans, head of the students and young consumers section at Consumer Financial Protection. Office. “It just creates the perfect breeding ground for crooks to take advantage of people.”
Kathleen Young unexpectedly found herself the victim of such a scam earlier this year. Just weeks after Young, an elementary school teacher in Palo Alto, Calif., Requested a Public Service Loan Forgiveness, a federal program that cancels student debt for eligible workers, she received a call. telephone.
Young assumed the caller, who said she could help forgive her student loan debt, was from the U.S. Department of Education and was calling about the public service program.
Caught a little off guard, Young verified her Social Security number and gave the woman her bank account information to sign up. she would see her first payment taken from her bank account in about 10 days.
Later, however, she realized that something was wrong. She researched Guidance Alum, the company that called her, and found that she was not associated with the Department of Education and had multiple complaints, including with the Better Business Bureau, about of its services.
“They got all this information from me, and I realized that they [the Education Department] would never ask for that information over the phone, ”Young said.
Guidance Alum did not respond to CNBC’s request for comment.
She was able to close the bank account she gave to the company and sent Guidance Alum a formal cancellation request. Now she has several services monitoring her Social Security number and she plans to keep them for the rest of her life, she said.
A few weeks later, she received an email from FedLoan Servicing, the agent who currently manages the civil service loan cancellation program for the Department of Education, and was able to enroll and start. to make payments for the cancellation.
Still, she said she felt bad about falling for something that wasn’t necessarily booming.
“You know, they say the hindsight is 20/20,” she said. “I didn’t think it could ever happen, but the red flags were there.”
How to spot and avoid scams
According to Evans, the best way to avoid getting ripped off is through prevention. Due to the current environment, people are expected to show a high degree of skepticism, she said.
There are a few key things people should watch out for if they get a phone call or letter about a student loan forgiveness.
For example, just because someone has information about your student loans, like the total balance, doesn’t mean they came from a legitimate transaction, Evans said.
“We know that the crooks illegally obtained credit reports and then use that information,” she said.
Look up the name of the program offered to you – some scams claim they are part of the ‘Biden loan forgiveness’ or the ‘CARES law loan forgiveness’, two programs that don’t exist, Evans said .
If you received a suspicious email, make sure it is sent from an email address that ends in “.gov”.
Remember, federal programs don’t require additional payment for loan cancellation, so if someone is talking about charging you, that should be an immediate red flag, Haile said.
She also said to be very careful with anyone requesting your personal information such as a social security number, federal student aid ID card, credit card or bank account – this information usually needs to be recorded on a secure portal or transmitted by telephone to the server.
If you think something may be a scam or are in doubt, the best thing to do is to contact your repairman directly, Haile and Evans said.
What to do if you are a victim
If you have been scammed and given important financial information, you must act immediately to protect yourself from further damage.
If you’ve provided a scammer with credit card or bank account information, immediately call your bank and your card company to close your accounts or stop payments.
You should also call your student loan department, especially if you’ve provided information such as your Federal Student Aid ID number, so they can monitor your account.
You may also want to check your credit report to make sure there is no suspicious activity, Evans said.
What to do if you’ve been contacted by a scammer
If you’ve received a suspicious phone call, voicemail, or even letter that you think is a scam, you don’t necessarily have to take immediate action if you haven’t responded or given some personal information.
“You have absolutely nothing to do, if you haven’t given them any information, everything should be fine,” Haile said.
However, you can report it. One option is to file a complaint with the Federal Trade Commission notifying them of the potential scam. Another is to call your state attorney general.
Finally, you might also want to check your credit score out of prudence, Evans said.
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