Don't pay -- where to get free help with your student loan: Internet Scambusters #730
Thousands, perhaps millions, of people are in trouble making payments on and clearing their student loan debt.
That makes them a sitting target for scammers who charge for debt relief support services that are free, or who sometimes just take the money and do nothing at all.
We'll explain how to spot the scam and where to get that free help, in this week's issue.
Let's get started...
5 Signs of a Student Loan Debt Relief Scam
Forty-four million Americans owe an estimated $1.3 trillion to $1.5 trillion in student loan debt -- and that's before you add in how much more is being ripped off them by scammers.
Many of those 44 million people are struggling to keep up with payments and clear their debts but it's no secret that a large proportion of them find the challenge next to impossible. They're desperate for a solution.
That makes them a sitting target for scammers offering bogus plans to refinance their loans or eliminate past-due payments -- provided they pay a hefty fee upfront. According to the pressure group Student Debt Crisis (SDC), victims are charged an average $600.
What they get for their money varies. Sometimes, it's nothing at all. Other times they do get a partial solution, but it's one that's actually available free of charge and open to any student to apply for.
Says the U.S. Consumer Finance Protection Bureau (CFPB): "In many cases, these companies promise thousands of dollars in savings on your student debt by falsely claiming special expertise or a relationship with the Department of Education, only to enroll you in a payment plan that’s available for free for all borrowers with federal student loans — all at a cost of hundreds of dollars or more.
"In other cases, these companies fail to deliver on their promises, leaving you with more debt and less time to avoid financial distress or default."
The U.S. Department of Education has already advised borrowers not to pay for these so-called support services. The Department operates a free loan forgiveness program (with fairly strict rules) as well as providing help with reducing payments.
For links to these services, see this Departmental blog published in June: Beware! You Don’t Have to Pay for Help with Your Student Loans.
During the past couple of years, the CFPB has put several so-called student debt relief agencies out of business.
Most of these crooked organizations have names that sound official and relevant, using words like "student loan" and "college education."
Warning Signs
According to the CFPB, the warning signs of a possible student loan debt scam, or at the very least, dubious or inappropriate behavior, include:
- Pressure to pay those high upfront fees. Scammers may try to make their victims sign a contract immediately or ask for a credit card payment over the phone before they even outline how they're supposedly going to help.
- Promises of immediate loan forgiveness and debt cancellation. "Debt relief companies do not have the ability to negotiate with your creditors for a 'special deal' under these federal student loan programs," the CFPB explains. "Payment levels under income driven payment plans are set by federal law and, for most borrowers, loan forgiveness is only available through programs that require many years of qualifying payments."
- Demands that you sign a third-party authorization or power of attorney. These are documents that gives the agency consent to talk to the student loan provider. The next step might be to insist you make payments directly to the agency and you have no idea whether they're being passed to your loan provider.
- Requests for your Federal Student Aid (FSA) PIN. This PIN number has the legal standing of a signature for the Department of Education. Once the "support" firm has it, it can effectively "sign" documents on your behalf.
If you think you may have been scammed, the Education Department says you should contact your bank or credit card company and try to stop payments.
You should also change your FSA PIN and submit a complaint, either to the Federal Trade Commission or the CFPB. You can also phone CFPB at 1-855-411-2372.
"Remember, there are no student loan companies affiliated with the U.S. Department of Education that charge fees to help you manage your loan repayment," the Department says. "We have many resources available to help you successfully manage your loans for free. Remember, if you have to pay, then stay away!"
Bogus Student Tax
Sadly, this isn’t the only scam targeting student loan borrowers.
During the past few months, crooks have been posing as IRS agents claiming there's a new Student Loan Tax and warning victims they'll be thrown in jail if they don’t pay up.
According to the National Association of Student Financial Aid Administrators, the scammers "spoof" their phone number to make it look like a government agency.
They also appear to have information about the students' financial affairs, for example how much they borrowed, and how much they now owe.
But they give themselves away when they ask their victims to make their tax payment using the MoneyGram cash wiring service. Neither the IRS nor any other government agency asks for payment by this untraceable method.
The IRS also says it will never call to demand immediate payment. Nor will it call to discuss unpaid taxes without first mailing out a bill. You can call 1-800-366-4484 to report a student loan tax scam.
Alert of the Week
Use firewood? If you do, are you sure you're getting what you pay for?
The trouble is that firewood is sold in "cords," an old-time volume measurement that most people have no idea about.
A cord is a stack of 4x4x8 feet or 2x4X16 feet, but disreputable deliverers often just tip their cargo as a mound so you have no way of checking if it's the right quantity.
The solution is to buy only from reputable dealers or to insist that the deliverer stacks the wood so you can check it.
Stay warm -- and don’t fall for the firewood scam!
Time to conclude for today -- have a great week!
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