Americans today struggle with more student loan debt than either credit card debt or automobile debt, according to the Federal Reserve Bank of New York. Unfortunately, this rising debt has also led to more scammers promising to drastically lower payments or even eliminate the debt altogether.
In addition, the number of robocalls continues to rise. In fact in January, a record 5.2 billion robocalls were received nationwide, according to YouMail, a company that helps block these calls. Along with health insurance and interest rate scams, student loan scams were at the top of the list.
And while all of the calls you might get concerning student loan debt are not scams, many will be just that. For consumers struggling with student loan debt, these calls may appear to be an easy way out. The promise of more affordable payments or even having the debt go away altogether is an alluring one. However, it is important to understand that there is no magic wand that will immediately make student loan debt disappear.
Here are steps borrowers can take to avoid becoming a victim of student loan repayment scams:
- Stay up to date on the latest debt relief scams.
- Protect your personal information.
- Find repayment help that doesn’t require large fees.
Step 1: Stay Up to Date on the Latest Debt Relief Scams
It is illegal for any company to charge you upfront to help you get out of debt. The Federal Trade Commission’s website advises, “Companies that make you pay upfront might give you no help and not give your money back.” You should also be wary of any promises of fast debt forgiveness.
Unfortunately, scammers know the vulnerabilities inherent in being massively in debt with no end in sight.
[Read: Watch for Warning Signs of Student Loan Company Scams.]
In December 2018, the FTC identified and shut down two Florida-based agencies – Student Debt Doctor and American Student Loan Consolidators – for their debt relief schemes.
Consumers were told that the upfront fees they paid were being used to pay their loans, when in fact these fees were simply being pocketed by the agencies. There were false promises of loan forgiveness, lower monthly payments and interest rate reductions. ASLC’s operators even pretended to be affiliated with the U.S. Department of Education or student loan servicers.
Step 2: Protect Your Personal Information
Never work immediately with anyone who initiates a call. If there is interest in finding out more, get the company name and at the very least do some online research on the company prior to any exchange of information.
In addition, never give out your FSA ID, which is the username and password you use on federal student aid websites such as studentloans.gov; this ID should be protected just like a Social Security number. Any call asking for this information should be a red flag for borrowers to stop communications.
Likewise, never sign a power of attorney to a company to take over accounts. Anyone who is working with the servicer on behalf of the borrower likely needs written permission, but giving over power of attorney is not necessary. Assigning power of attorney could allow the company to change personal information, such as mailing addresses and phone numbers, that would allow them to conduct business, or not, without the borrower knowing what’s going on.
Step 3: Find Repayment Help That Doesn’t Require Large Fees
Those struggling with debt have options available to them that do not involve large upfront and monthly maintenance fees. If the loans have reached a past-due status, they will likely be subject to collection fees, but those fees are federally regulated and must be affordable. Any relief being offered by a third party for a fee can be achieved for free by the consumer.
To find help repaying student loans, visit Federal Student Aid or talk to a nonprofit student loan counselor. It’s best for consumers to go directly to their loan servicer to discuss more affordable payments, as well as find out about loan forgiveness, cancellation or discharge.
Companies that randomly call offering to take care of these services are likely to charge unnecessary fees without actually doing anything to help, resulting in even more problems for the consumer struggling to pay student loans.