As the U.S. Department of Education finalizes its student loan forgiveness program, the White House has stepped up efforts to protect borrowers – eager for loan relief – from the growing number of scams that target millions of people who may be eligible for forgiveness.
The debt forgiveness plan, announced in August, would wipe away up to $20,000 in student loan debt – $10,000 for most borrowers. It didn’t take long for scammers to try to exploit the situation.
As we reported last month, a common scheme involves an imposter, claiming to work for the “Biden Student Loan Forgiveness Program.” From there, the scam can move in different directions, with different goals.
In some cases, the scammer may say that you have to pay an upfront fee. Some are even brazen enough to tell victims they must redirect their regular student loan payments to them.
The White House has now launched a full-scale counter-offensive against these scams. A key element is arming student loan borrowers with information.
As a first step, the White House is establishing a single, secure website to dispense facts about the forgiveness program. It will be the one place borrowers can go to receive vetted information.
Step two involves regulators and enforcement agencies. The Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) are working together to identify and take action against student loan scammers.
“Over the course of the last 18 months, the FTC has reached nearly $30 million in settlements that included refunds for tens of thousands of student borrowers who were illegally charged upfront fees and falsely promised reduced or eliminated student loan payments,” the White House said in a statement. “Earlier this year, the FTC won a $7.5 million judgment against Arete Financial Group and permanently banned the company from the student loan business for illegal upfront and monthly fees.”
The third step involves alerting student loan borrowers to tricks that debt relief scammers have employed so far. They include:
Offering to assist borrowers for an upfront fee. There is NO charge to participate in the debt forgiveness program.
Someone contacts a borrower and claims to be from the government. Government employees will not contact borrowers until AFTER they have applied.
Someone offering help to secure loan forgiveness creates a sense of urgency, claiming the borrower will miss out if they don’t act immediately.
A website or email claiming to be affiliated with the program that DOES NOT have a .gov URL is not legitimate.
In short, no one from any government agency will contact a student loan borrower out of the blue. Once the debt relief program opens, borrowers will be encouraged to contact the Department of Education to apply.
The administration plans to use social media platforms to help warn borrowers about scammers. As the program beings accepting applications, the White House said it will engage directly with digital creators and influencers on social media platforms to help spread accurate information about the program and alerts concerning potential scams.