Avoid Student Loan Debt Scammers

On May 5, the federal Department of Education resumed collection on student loan debt for defaulted federal loans. DATCP is alerting consumers to the possibility of scammers taking advantage of the changing situation for their own benefit.

Collections were paused in March 2020, but now involuntary collection efforts like wage garnishments, tax refund offsets, and Social Security benefit reductions are back in effect for defaulted federal student loans. Before wage garnishment can begin, affected borrowers must receive a 30-day notice, and it is expected that that borrowers in default may see wage garnishment begin this summer.

These borrowers may search for ways to reduce or more effectively repay their student loan debt. Scammers know this and will prey on that desire. Borrowers should be aware of these red flags:

· Requests for upfront fees. If a company charges upfront to reduce student loan debt or assist in debt repayment, it is likely a scam. These types of fees are prohibited for loan service providers.

· Promises of immediate loan forgiveness or cancellation. Before they even know the details of a consumer’s situation, scammers might claim they can quickly eliminate or reduce their debt. They may reference real programs that few people qualify for, claim they can “dispute” loans to wipe them out, or say they have a special relationship with government agencies like the Department of Education.

· Requests for a Federal Student Aid (FSA) ID. Some scammers claim they need a consumer’s FSA ID to help them – but this ID should never be shared. The FSA ID has the same legal status as a signature, and a scammer with someone’s FSA ID could access their account and take control of their personal information without their knowledge.

· Limited time offers. To get consumers to act fast, scammers will instill a sense of urgency by saying they could miss qualifying for a repayment plan, loan consolidation, or forgiveness program if they do not act immediately. Consumers should not be pressured to act. Instead, they should take the time to thoroughly research claims before taking any action.

· Requests to sign a third-party authorization form or a power of attorney. These written agreements give a company legal permission to make decisions with a consumer’s federal loan servicer on their behalf. Scammers use this to change consumers’ contact and payment information, stealing their money without their knowledge.

Federal student loan debt borrowers can proactively protect themselves by staying in communication with their loan servicers, regularly checking on the status of their loans, and finding resources that can assist them with repayment. Trustworthy resources that borrowers in Wisconsin can rely on include:

· Wisconsin Student Loan Help Hotline: 833-589-0750. Created in partnership with Wisconsin Coalition on Student Debt and Ascendium Education Solutions.

· Wisconsin Coalition on Student Debt: DebtSmarts.org. A nonprofit seeking to raise awareness of student debt, college affordability, and loan repayment issues.

· Federal Student Aid at StudentAid.gov. An office of the U.S. Department of Education and the largest provider of student financial aid in the U.S. Assists borrowers with federal aid, grant, forgiveness, and repayment programs.