PHEAA

Borrowers beware of student loan forgiveness scams

The Pennsylvania Higher Education Assistance Agency is cautioning borrowers to be aware of a new wave of harmful scams attempting to take advantage of confusion surrounding President Joe Biden’s plan to forgive up to $20,000 in federal student loans.

“There has been a great deal of uncertainty since the announcement of the administration’s student loan forgiveness plan as details continue to emerge,” state Rep. Mike Peifer, R-139th, PHEAA board chairman, said in a news release.

“This creates ideal conditions for unscrupulous scammers to capitalize on the most vulnerable - those who can least afford to be the financial victims as they are already struggling to manage their student loan debt.”

The Consumer Financial Protection Bureau has received many complaints from borrowers about companies promising to deliver student loan services in exchange for fees. In such scams, borrowers often believe they were talking to their loan servicer or a company acting on behalf of the United States Department of Education.

“Scammers have become more sophisticated in recent years, using highly-sophisticated methods to lure unsuspecting borrowers into profit schemes,” state Sen. Wayne Fontana, D-42nd, PHEAA board vice chairman said in the news release.

“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.”

Scammers use multiple modes of communication to reach borrowers, including social media, text messages, emails or phone calls. They are also very skilled at posing as government representatives and may even have look-alike government websites and logos to trick unsuspecting victims.

Borrowers are encouraged to visit the U.S. Department of Education’s Federal Student Aid website, studentaid.ed.gov, to check on the status of the loan forgiveness program and only work with their trusted partners when assistance is needed with managing their student loans. Borrowers should never pay for a service that is available to them for free.

Here are some red flags you should look for to avoid being scammed:

•Claiming to be affiliated with your loan servicer or the U.S. Department of Education - The company claims to be associated with the U.S. Department of Education or a federal loan servicer but does not have your loan details readily available in their system.

•Receiving out-of-the-blue calls, emails or text messages claiming to be from the government - In general, the government will not attempt to contact you using these methods unless you grant permission.

•Charging upfront fees for free programs or services - Scammers often attempt to charge money for programs and services borrowers can access for free. Loan forgiveness, loan consolidation, student loan forbearance and deferment are all provided for free by your federal loan servicer.

•Requesting to sign a power of attorney - Some consumers have been asked to sign a power of attorney or other third-party authorization so they can make changes to their account. Do not give this power to someone unless you know and trust them.

•Pressuring borrowers to decide quickly - Scammers might say you only have a limited time to take advantage of an offer or program. Take your time. An honest company will not pressure you to decide quickly. If there’s any doubt, end the conversation and research the company to confirm whether they are legitimate.

•Asking borrowers to provide personal information - Consumers reported being asked for their Social Security number, bank information, FSA ID and studentaid.gov login information. If you’ve shared your personal information with someone whom you suspect to be a scammer, log in and change your account password as soon as possible. You should also check your account information (contact email, address and phone number) to make sure it is still accurate.

•Encouraging borrowers to cease communications with your loan servicer - Scammers will often encourage consumers to end communication with their loan servicer. It is crucial for you to maintain communication with your loan servicer. Avoid any company urging you to make payments to their company instead of your loan servicer or to stop communicating with your loan servicer.

If you have been targeted by a scammer or think you may be a victim:

•Cancel your payments - If you realize after the fact, work with your bank to cancel or block your scheduled payment. Banks should have policies in place to help you avoid future fraudulent activity.

•Contact your servicer - They can help you protect your account. If you signed a power of attorney giving the scammer the right to communicate with your servicer on your behalf and get it revoked.

•Submit a report to the Federal Trade Commission or the U.S. Department of Education’s Office of Inspector General.

•Contact the Pennsylvania Attorney General’s Office.

For information regarding the recent loan cancellation announcement, contact your loan servicer or visit studentaid.gov/debt-relief-announcement.