Scammers prey on student borrowers who hope for federal loan forgiveness, officials say
Beware, say government officials. Scammers are looking to exploit borrowers by offering help applying for the Biden administration’s student debt forgiveness plan.
Scammers are targeting student loan borrowers who think they can be helped with President Joe Biden’s student loan forgiveness program, Biden administration and Pennsylvania officials warn.
The program has not been finalized yet by the U.S. Department of Education.
Scammers say they can help borrowers “get to the front of the line to qualify for forgiveness,” an official with the Consumer Financial Protection Bureau (CFPB), a federal watchdog, said on Thursday. She wasn’t authorized to speak publicly.
“There is no getting to the front of the line. There is no one who can get to the top of the list. So if anyone is telling you they can get you to the top of the list, they are lying,” the official told The Inquirer. “There is no such thing as a legitimate phone call about student loan cancellation right now.”
Student loan borrowers have reported scammers operating in the student loan business for years, and the CFPB published a consumer advisory on the issue earlier this year. But officials say there has been an uptick in the reports since Biden announced his debt forgiveness plan in August.
The plan would cancel $10,000 in federal student loan debt for borrowers making under $125,000 a year or families making less than $250,000 a year. Borrowers who received federal Pell Grants could be eligible for total forgiveness of up to $20,000. Forty-five million borrowers nationwide could benefit from the forgiveness plan. Student borrowers owe about $1.5 trillion in federal student loans to the Education Department.
But the details — even how to apply for the forgiveness — have not been announced. Even experts have questions on how it will work. An application could be made available this month.
The Biden administration was convening a group of top leaders in federal agencies on Friday to boost “administration-wide to protect student loan borrowers from scammers,” the White House said in a briefing on Wednesday.
The Pennsylvania Higher Education Assistance Agency (PHEAA), a state agency in Harrisburg also known to borrowers as FedLoan, has been one of the nation’s largest servicers of federal student loans. It is in the final stages of exiting the federal loan servicing business. On Wednesday, the agency also warned of scammers.
The agency noted red flags for borrowers.
One is a person who claims to be affiliated with a federal student loan servicer but does not have “your loan details readily available in their system.”
Another red flag would be a borrower receiving “out-of-the-blue calls, emails or text messages claiming to be from the government.” Typically, the government will not contact a borrower this way unless the borrower grants permission.
Someone offering help while “charging upfront fees for free programs or services,” or requesting a borrower to sign a power of attorney, also would be red flags.
“There has been a great deal of uncertainty since the announcement of the administration’s student loan forgiveness plan as details continue to emerge,” said State Rep. Mike Peifer (R., Pike), chair of the PHEAA.
State Sen. Wayne Fontana (D., Allegheny), PHEAA’s vice chair, added that the “most effective way to avoid becoming the victim of a scam is to remain vigilant and knowledgeable, especially when asked by anyone to provide personal information or while engaging in any financial transaction.”