Beware of A New Surge In College Student Loans Scams. On December 7th, 2020, the House and the Senate had approved new legislation intended to establish criminal penalties for those who access student loan information from the U.S. Department of Education information technology systems for “commercial advantage” or their own financial gain. Offenders can be subject to a fine, a prison stay of up to five years, or both.
The bill, which has been named the Stop Student Debt Relief Scams Act, would also expand requirements for loan exit counseling for colleges and universities that participate in federal student aid programs.
This exit counseling intends to curb fraud even more by warning students about so-called student debt relief organizations. The law would also require the Department of Education to prevent hackers and thieves from accessing their database for student aid, and to warn students if anything fishy is noticed with their accounts.
With the Covid-19 student loan forbearance to end on January 31, 2021, it’s expected that we will see a rise in these companies trying to take advantage of scared borrowers.
It remains to be seen if the Stop Student Debt Relief Scams Act will become law, but even if it does, student borrowers should be keeping their eyes out for new and old student loan scams. While the worst offenders have been laying low since interest and payments were paused on federal student loans through January 31, 2021, you can expect the same fake student debt relief companies (and perhaps even some new ones) to be back in full force after the beginning of the year.
To avoid student loan scams, the U.S. Department of Education states that you never have to pay for assistance for your student loans. Unfortunately, way too many companies masquerade as debt relief companies who can offer some type of help for student borrowers. Often these companies will try to charge you $1,500 or more for services you can get from the U.S. Department of Education for free, and they may even try to steal your personal information or your identity.
You can usually spot fraudulent companies easily since they tend to make wild claims, but it does help when you know what to look for. These companies might say you have to pay for their help now, or you’ll miss the opportunity altogether. Others might guarantee you’ll qualify for more financial aid, which is just plain sketchy since there’s no way a third-party company can do that.
Some companies may be more interested in obtaining your personal information instead of helping you out. For example, they might promise to erase some of your debt or help you qualify for more aid, but only if you give them your credit card number or bank account information. In addition, if anyone from an organization claims that they can assist you with your student loans and asks for your FSA ID username and password, hang up immediately.
If you would like more information on this topic and how to better navigate your loans, please contact our staff.
