If you’re one of the millions carrying student loan debt, scammers are circling with promises to lower or erase it for a fee. Here’s how to spot them — and where to get the same help for free.
As Halloween approaches, the phrase “trick or treat” is everywhere. But Billshark wants to remind you that, if you’re not vigilant, the trick could be on you.
1 Why Borrowers Are Being Targeted
If you’re one of the 44.2 million people carrying student loan debt, you could be the target of one of any number of shady characters lurking about who are promising to “help” you with it.
As college tuition has soared ever higher in recent years, and the pressure to attend college has risen almost as fast, more and more young people are saddled with a debt they find they can’t repay as they’d hoped to. The Consumer Financial Protection Bureau (CFPB) reports that 1.2 million borrowers defaulted on their student loans in 2016.
College loans are the only debt that cannot be wiped out by bankruptcy, and if a graduate cannot find a job on graduation that is sufficient to handle the monthly payments, he or she naturally becomes desperate. Student debt has increased more than 500% since 1999, but the average salary for recent graduates has declined by 10% over the same period, thus making it even harder to repay the loan.
2 How the Student Debt-Relief Scam Works
That’s when the shady characters, scammers and outright crooks swoop in. Student loan borrowers are inundated with letters, postcards, emails, and phone calls from companies promising they can either lower the debt or erase it outright. For a “small” fee-usually $500 to $1,000-they represent themselves as specially connected to the government, or possessing inside information privy only to themselves, that they will reveal to you upon receipt of payment.
Don’t believe it. While some debt relief agencies are in fact legitimate, there is nothing these independent operators can do for you that you can’t do for yourself. For free. There are numerous government agencies that will can help you manage this debt. Others are attempting to rein in the predators, many of whom demand payment up front (which itself is illegal) and do nothing to resolve the debt.
3 Regulators Are Fighting Back
This month the CFPB reported in its annual Student Loan Ombudsman Report that it resolved 20,600 federal and private student loan complaints for the year beginning in September 2016 and ending in 2017. Over the same period, it also responded to approximately 2,300 debt-collection complaints about private and federal student loans. Since 2011 it has been able to return $750 million to borrowers who have been victimized by such scams.
The Washington Post reported last week that the Federal Trade Commission (FTC) has partnered with 11 states and the District of Columbia in “Operation Game of Loans” to crack down on deceptive student debt-relief scams.
Riffing on the popularity of “Game of Thrones,” the initiative will go after those it sees as preying on desperate borrowers. Acting chairman Maureen K. Ohlhausen told The Post, “Winter is coming for debt-relief scams that prey on hard-working Americans struggling to pay back their student loans.”
4 Where to Get Real Help — For Free
Meanwhile, don’t respond to unsolicited offers of assistance, regardless of the source. And never give out your FSA ID number to anyone.
“You do not have to use these companies. That’s untrue,” Persis Yu, a staff attorney with the non-profit National Consumer Law Center, told NBC News last year. “Borrowers can go to their loan servicers and access these programs on their own and they don’t need to pay any money.”
If you have a federal loan that you’re finding difficult to repay, you can get free information on repayment and forgiveness programs at StudentAid.gov/repay. The Department of Education (DOE) offers several programs (https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven) that can lower payments for many people, based on their income. And, even if you’re in default, check out the CFPB’s repayment tool, Repay Student Debt (Repay Student Debt), to learn about your options.
The FTC offers tips on how to spot student debt-relief scams. If you believe you’ve been a victim of a debt-relief scam, you can submit an online complaint at FTC
Above all, remember to turn to Billshark for help with real debt relief on all your bills.
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Frequently Asked Questions
How can I spot a student loan debt-relief scam?
Watch for companies that contact you with letters, postcards, emails, or phone calls promising to lower or erase your debt. They typically charge a “small” fee of $500 to $1,000 and claim special government connections or inside information. Demanding payment up front is itself illegal. Don’t respond to unsolicited offers of assistance, and never give out your FSA ID number to anyone.
Do I have to pay a company to manage my student loan debt?
No. According to Persis Yu of the National Consumer Law Center, “You do not have to use these companies.” There is nothing these independent operators can do for you that you can’t do for yourself, for free. Borrowers can go directly to their loan servicers and access repayment and forgiveness programs on their own without paying any money.
Where can I get free help repaying my federal student loans?
If you have a federal loan that’s difficult to repay, get free information on repayment and forgiveness programs at StudentAid.gov/repay. The Department of Education offers several income-driven programs that can lower payments based on your income. Even if you’re in default, the CFPB’s Repay Student Debt tool can help you learn about your options.
What is “Operation Game of Loans”?
The Washington Post reported that the Federal Trade Commission partnered with 11 states and the District of Columbia in “Operation Game of Loans” to crack down on deceptive student debt-relief scams. Riffing on the popularity of “Game of Thrones,” the initiative targets those preying on desperate borrowers struggling to pay back their student loans.
What should I do if I’ve been a victim of a debt-relief scam?
The FTC offers tips on how to spot student debt-relief scams. If you believe you’ve been a victim, you can submit an online complaint to the FTC at reportfraud.ftc.gov. Since 2011, the CFPB has returned $750 million to borrowers who were victimized by such scams, so reporting fraud can make a real difference.
