The federal government is moving at the pace of cold molasses, so you shouldn’t be surprised that the US Department of Education has yet to reveal how to apply for the student debt relief promised in August.
But you still need to be patient because anyone offering to help you apply now might be a scammer.
Internet security company senior technical director Kevin Roundy NortonLifeLock in Culver City, said he had seen several scams aimed at borrowers seeking loan forgiveness advice online. The goal, he said, is to trick you into signing up for a service that’s going to cost you money — or refinancing your debt into a new, privately issued student loan.
For example, he says, some will direct you to a site that tries to persuade you not to follow the advice of your student loan officer. The site will claim the repairman will give you bad terms, but “we’ll give you the best terms,” Roundy said. Or they will suggest that you apply for debt forgiveness directly to the education department, without going through your loan officer.
But the reality is this: there is no better offer and you will be able to apply directly to the department on your own.
“They’re trying to look like they’re cutting out the middleman,” Roundy said, when in fact they’re trying to insert themselves as the middleman.
Some try to reach you on the phone, where they promise lower monthly payments if you refinance your student loans through the lender of their choice, Roundy said. But loans issued by the private sector are not eligible for the debt forgiveness announced in August, or any of the other borrower-friendly options offered by the federal government.
The more people visit the scammers’ sites, the higher they will appear in online search results, which will attract more people to them.
Roundy said he has visited several such sites, and while he has not seen any that mimics the Ministry of Education site studentaid.gov site, they always look very professional. “Unfortunately, one of the issues we have… [is] if we see a site that looks really slick, we think, ‘Oh, this must be legit’,” he said.
Online reviews of the sites show that “people realize pretty quickly that they’ve been scammed,” Roundy said. Nevertheless, they “are struggling to get their money back”.
On its student loan portal, the Education Department warns that scammers may try to lure you into pretending that time is running out to get loan forgiveness. Other appearances convey a similar sense of urgency, according to the department, including: “Your student loans may qualify for full discharge. Registrations are first come, first served” and “Student Alerts: Your student loan is flagged for cancellation pending verification. Call now!”
That kind of tone is a sure sign of scamming, the ministry says. Another dead giveaway is when someone asks you for money up front or on a recurring monthly basis in exchange for full debt cancellation, depending on the department.
A third red flag is when a site 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. It’s a guarantee,” the department’s website says.
To avoid getting tricked, here are a few more things to remember.
1. There is no rush to apply. The Education Department is expected to make application forms available online in October, and you can sign up to be notified by email when the forms are available. You’ll need to have an account on studentaid.gov, but you should have one anyway – you’ll need it to make sure your details and payment history are correct.
By the way, the department said that borrowers who meet annual income limits (no more than $125,000 for a single person or $250,000 for a couple) will automatically qualify for loan forgiveness if they have their income information already. So if you filed annual tax returns under an income-driven repayment plan, you shouldn’t have to fill out a form to receive the loan forgiveness announced in August.
2. You don’t have to pay anyone to get the promised loan forgiveness. There will be no fees involved, and the department says the form (if you need to apply) will be simple to complete. Anyone who offers to help you for a fee is trying to take advantage of you.
Granted, your situation may be complicated – for example, you may have several different types of student loans, and if your parents still claim you as a dependant, their income, not yours, will determine your eligibility. But you should be able to navigate by following the instructions on studentaid.gov.
3. Beware of anyone asking for sensitive financial information. Scammers can’t access your student loan or bank account information unless you give it to them. So don’t. And if a site claiming to be an official government agency asks for this information, check its web address carefully – it may be a slightly modified version of the real thing.
4. Nobody can make all your debts disappear immediately. A common rhetoric from scammers is a promise of immediate and total debt cancellation. It’s an offer they can’t fill.
The federal government has a number of programs that can forgive the debt after 10 to 25 years of monthly payments, but these are hardly instantaneous. The new general forgiveness, meanwhile, is capped at $10,000 (or $20,000 for borrowers who received Pell Grants), which is less than many borrowers owe. (And this plan is being challenged in court.) So, instant total debt relief is too good to be true.
5. You may need to consider your state tax bill. Currently, the amount of debt forgiven under Biden’s general plan would be taxable as income by California. The state’s two top lawmakers have promised to pass a legislative solution by the April tax due date.
6. If you are scammed, you can limit the damage. The Department of Education advises people who realize they have been scammed to speak to the company that handles their federal student loans as soon as possible to block or revoke any changes.
Other actions recommended by the ministry include stopping all payments to the scammer by 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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