The Department of Education's Fourth Quarter Report of 2021 states that student debt affects 43.4 million Americans, or one out of eight.
No matter what your opinion on the issue of loan forgiveness is, there's no denying that the debt burdens a significant portion of Americans. The people who have student debt are not only young college graduates, but also older and middle-aged adults. According to this report, the group with the largest debt is adults under the age of 30 (17.3 million), who have a total of $578 billion. However, the Americans aged 30-44 hold the largest debt amount ($823billion).
COVID-19, a pandemic that has been sweeping the world since 1999, brought to light the urgency of student loan debt. When the unemployment rate skyrocketed after lockdowns in March of 2020, the federal loan repayments were halted. In recent years, there have been numerous discussions about how to eliminate student loan debt. The government has struggled to find a resolution, despite the fact that reasonable people have taken both sides. Fraudulent actors are now preying on those who wait.
Scam Artists: Beware!
The financial uncertainty is giving scammers plenty of opportunity to exploit desperate borrowers. Eva Velasquez of the ID Theft Resource Center says: "We are hearing more and more about [these frauds]. It takes time for people to report the scams when they first appear. But we are hearing more about them from those who have received solicitations.
Velasquez said that scams can be seen on social media but also in unsolicited calls or text messages. Scams can easily be identified because legitimate loan providers will not call or message a borrower at random. Unfortunately, there are more insidious scams waiting to be sprung on the unwary.
There are three main types of student loan scams
Rebecca Safier says that if anyone is charging you a fee to forgive your loan, it is a red flag. There are legitimate loan forgiveness plans that will forgive a portion or even all of your debt. However, they won''t charge any fee. Safier said that while there are reputable financial counselors, who charge fees for financial plans for repayment, there isn't anything that a borrower couldn't do by themselves. "You are able to apply for a repayment schedule [and] pursue loan cancellation on your own," says Safier.
Also, the process of forgiveness for student loans is complex and long. She warns that "if someone says: 'Pay us this amount, we will eliminate your student loan' it could be a scam.
Loan consolidation is another common scam. Robert Farrington is the founder and editor-in chief of The College Investor. He says that while student loan consolidation by the Department of Education is free, companies charge $1,500 for it.
Even worse can happen. It's not the same if you are charged for a free service. What happens when someone makes a promise to consolidate all your loans but then doesn't do anything? Farrington says this is when borrowers are in worse shape than before. "Their loan may be at the brink of default."
Some companies claim to be able to negotiate repayment or forgiveness of private student loan debts. These pseudo law firms encourage borrowers by claiming that they are not responsible for the repayment of student loans.
The lender is more likely to be willing to negotiate terms of repayment if the funds are kept safe. The firms then disappear with the money they have earned.
Scammers could also try to get access to personal information of a borrower, like their SSN number or bank account, in an attempt to steal funds or, even worse, a false identity. Or, they could ask for the FSA ID of a borrower–the unique login on the federal student assistance website. Scammers can steal the credentials of social media, email, and other accounts if the borrower is not careful to use unique passwords.
Velasques says that when people feel burdened with this financial albatross on their necks, they are desperate to escape it. The risk-aversion decreases because […] rewards could be so great. Velasquez believes that people think they don't have anything to loose, but borrowers actually have "a great deal to lose." It all depends on your interaction with the scammer.
What to do if you've been scammed
Scams are common and do not reflect on the abilities of a person. The scammers are always working on their tricks and devising new methods. So there's no need to be ashamed if you accidentally click the wrong links or answer the incorrect text. What happens next depends on how much is affected.
Velasquez: "There's no one-size-fits-all risk minimization/recovery program." In the event that a person's SSN was compromised, it is important to first freeze their credit in order to prevent any new credit accounts from being opened. If someone is tricked into creating a new username/password, but they have used it before, then you need to change that password across all websites.
If a scammer has lost money, it is unlikely that they will be able to recover it unless the charge on their credit card or bank transfer can be cancelled before it happens. Velasquez: "If you sent them money via Bitcoin, a wire, a money transfer, a gift card, or even a money-order, it is unlikely that you can recover the money."
It is also possible to (and highly recommended) file a complaint at the Consumer Finance Protection Bureau. These avenues may not be able to act on individual cases but the more complaints that are received, the greater the chance of them shutting down bad companies.
Does the possibility of loan forgiveness exist?
Farrington: It's important that you know that today, federal student loans are available to about 50 percent or more of borrowers. There are many options for student loan help.
Public Service Loan Forgiveness. Farrington says if you work for the government for 10 consecutive years, your loan will be forgiven. This option takes time and is complicated. Borrowers must file paperwork (the Employer Certification Form) that has been signed by the HR representative of their organization and their employer. Farrington states that scammers might offer to help you file the paperwork, but charge a fee. This is despite it being free. Scammers can also claim to be filing paperwork, but then not do so, making the borrower's situation worse.
Teacher Loan forgiveness is also an option. It takes five-years to complete. The years spent as a teacher have to be consecutive, and they must have been completed in a program that qualifies.
The federal government also offers additional ways to reduce student debt. Some of these options include joining the U.S. armed forces, working for AmeriCorps and enrolling in a program based on income. There are few forgiveness options for private loans. It depends on which lender you're dealing with.
To avoid these traps, there are three main points. If you haven't done so already, it is important to do so.
If you don't have a lender in mind, it is likely that the person calling, messaging, or posting on social media to try to get you to do something bad for yourself. All forgiveness programs require time, but are completely free. You can find all the information about forgiveness programs by visiting a legitimate website.
Knowledge is the most powerful tool. By becoming familiar with the various options available, you can minimize any dangers. There are many dangers in the world. But with the proper tools, we can keep ourselves safe.