Student-loan forgiveness: Don’t fall for these scams

The federal government is moving at the pace of cold molasses, so don’t be surprised that the US Department of Education has yet to disclose how it can apply for the student loan debt relief it promised in August.

But you still have to be patient because anyone who helps you apply now could be a scammer.

Kevin Roundy, senior technical director of Culver City internet security firm NortonLifeLock, said he’s seen several scams targeting borrowers who were looking online for loan forgiveness advice. The goal, he said, is to get you to sign up for a service that costs you money — or refinance your debt into a new, privately-issued student loan.

For example, he said, some will direct you to a website that tries to convince you not to heed your student loan officer’s advice. The site will claim that the service provider is offering you bad terms, but “we are giving you the best terms,” ​​Roundy said. Or they offer to take your debt relief application directly to the Department of Education, bypassing your loan servicer.

But the reality is this: there is no better offer and you can apply directly to the department yourself.

“They’re trying to make it sound like they’re cutting out the middleman,” Roundy said, when in reality they’re trying to fit in as the middleman.

Some try to get you on the phone promising lower monthly payments if you refinance your student loans through their chosen lender, Roundy said. But privately issued loans are not eligible for the debt relief announced in August or any of the other borrower-friendly options offered by the federal government.

The more people visit scammers’ websites, the higher they appear in online search results, which in turn attracts more people to them.

Roundy said he’s visited several of these websites, and while he’s seen none that mimic the Department of Education’s studentaid.gov website, they still look very professional. “Unfortunately, one of the problems we have is … [is] When we see a website that looks really fancy, we’re like, ‘Oh, that must be legit,'” he said.

Online reviews of the sites show that “people realize they’ve been scammed pretty quickly,” Roundy said. Nevertheless, they had “difficulty getting their money back”.

On its student loan portal, the Department of Education warns that scammers may try to lure you in by claiming that time is running out to get loan forgiveness. Other pick-up lines convey a similar sense of urgency, the department says, including: “Your student loans may qualify for a full discharge. Enrollments are processed on a first come, first served basis and Student Warnings: Your student loan is flagged for forgiveness that has not yet been reviewed. Call now!”

That kind of tone is a sure sign of a scam, the department says. Another dead sign is when someone asks you for money up front or on a monthly basis in exchange for a full debt settlement, the department says.

A third red flag is when a website asks for your Federal Student Aid username and password. The Department of Education “and its partners will never ask you for your FSA ID password. That’s a guarantee,” the department’s website said.

In order not to break a sweat, here are a few more things to consider.

1. There is no rush to apply. The Department of Education is expected to make the application forms available online in October, and you can sign up to be notified by email when the forms are available. You must have an account with studentaid.gov, but you should still have one – you need it to ensure your contact information and payment history is correct.

Incidentally, the department has said that borrowers who meet annual income limits (no more than $125,000 for a single person or $250,000 for a couple) automatically qualify for a loan forgiveness if they already have their income information. So if you filed annual income statements as part of an income-based repayment plan, you shouldn’t have to file forms to receive the loan forgiveness announced in August.

2. You don’t have to pay anyone to get the promised forgiveness. There are no fees, and the department says the form (in case you need to apply) is easy to fill out. Anyone offering to help you for a fee is trying to take advantage of you.

Admittedly, your situation can be complicated — for example, you may have several different types of student loans, and if your parents still claim you as dependent, their income, not yours, will determine your eligibility. But you should be able to navigate this by following the instructions on studentaid.gov.

3. Be careful when someone asks for sensitive financial information. Scammers cannot gain access to your student loan information or bank account unless you give it to them. So not. And if a website claiming to be an official government agency asks for this information, check its web address carefully – it may be a slightly altered version of reality.

4. No one can make all your debts go away at once. A common pitch used by scammers is promises of immediate and full debt relief. It’s an offer they can’t fulfil.

The federal government has a number of programs that can forgive debt after 10 to 25 years of monthly payments, but these are hardly immediate. The new lump sum forgiveness, meanwhile, is capped at $10,000 (or $20,000 for borrowers who received Pell Grants), which is less than many borrowers owe. (And that plan is being challenged in court.) So immediate full debt relief is an offer too good to be true.

5. You may need to consider your state tax bill. Currently, the amount of debt forgiven under Biden’s lump-sum plan would be taxable as California income. The state’s top two lawmakers have promised to pass legislation by the time the taxes are due in April.

6. If you get scammed, you can limit the damage. The Department of Education is advising people who realize they have been scammed to speak to the company servicing their government student loans as soon as possible to block or revoke any changes.

Other steps recommended by the department include stopping all payments to the scammer through your bank or credit card company and filing a complaint with the department, the Federal Consumer Financial Protection Bureau, and the Federal Trade Commission.

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https://www.latimes.com/california/story/2022-09-29/how-to-avoid-student-loan-forgiveness-scams Student-loan forgiveness: Don’t fall for these scams

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