Student Loan Scammers Steal Thousands with False Promises to Lower Debt

Affecting nearly 45 million Americans and totaling more than $1.5 trillion, according to a recent media report, student loan debt is at its highest level ever and has become a national crisis. BBB Serving Metropolitan New York is issuing an alert, noting 2019 BBB Scam Tracker consumer reports about fraudulent offers to reduce or cancel student loan debt.

“Consumers struggling with debt are prime targets for scammers looking to take advantage of them,” said Claire Rosenzweig, President and CEO of BBB Serving Metropolitan New York. “They may target individuals and families in difficult situations, offering a new payment plan or a route to debt relief that’s simply too good to be true.”

Consumers report to BBB that they have been contacted by “advisors” who falsely claim that they qualify for vastly reduced student loan payments or for loan forgiveness programs. In many cases, the “advisor” also claims they are working for or with a government agency. Often, the consumer is offered significant payment reductions per month and/or a finite amount of payments leading up to supposed “forgiveness” of the balance of the debt.

It’s a scam. Once these payments begin, the “advisor” or company pockets them instead of passing them on to the loan provider as promised. The borrower is left still in debt, sometimes with loans refinanced without their consent at worse interest rates than before, and with outstanding payments or entries in their credit reports that negatively affect their credit scores. In the process, they may also have granted the scammer access to online accounts for government loans or private financial resources, personal documents, and other information useful in committing identity theft.

The FTC announced on September 12, 2019 that it has brought criminal charges against several debt relief scheme operators and a financing company that assisted them in harvesting millions of dollars from student loan debt holders. To help combat these types of frauds, the FTC has released consumer education on loan debt relief, including warning signs of scams, at ftc.gov/StudentLoans.

Confusion about the availability of loan forgiveness programs contributes to this disturbing trend in student loan scams. For most debt holders, loan forgiveness is an unrealistic prospect—for example, the U.S. Department of Education approved less than 1 percent of public loan forgiveness applications submitted in 2018. Companies claiming to provide paths to loan forgiveness are almost certainly fraudulent.

If you have concerns about your student loan debt, BBB Metro New York recommends:

Talk to your original lender first if you need to reduce or reschedule your payments.
Visit BBB’s Scam Tracker to see reports on how student loan scammers operate.
Investigate any advisor or company thoroughly before entrusting money or personal information, especially if you were contacted directly with an offer you didn’t seek out.
Consult your state’s financial regulatory agency, which your state’s Attorney General can help you identify, if you have concerns about an advisor or company.
Per FTC advice, treat any promise of speedy debt forgiveness as fraudulent.
Don’t trust urgent calls pressuring you for payment or information. Never pay any up-front fees for help managing debt.
Check BBB.org and read any reviews and complaints posted about a company.

You can apply for loan deferments, forbearance, repayment, and forgiveness programs at no cost, so don’t pay a third-party company promising to handle it for you. Apply directly and for free through the U.S. Department of Education or your loan servicer. Visit StudentAid.gov/repay to learn your options for repaying federal loans. To plan private loan repayment, speak directly to your loan servicer.

Before refinancing any loans, it’s important to understand your options and the potential impact of loan changes. Extending loan payments over a longer time period will often result in higher total payments. If you’re thinking of consolidating your loan, determine whether it would result in a loss of favorable terms and consumer protections, especially those associated with government loans. Further tips are available from the Consumer Financial Protection Bureau and on BBB.org.

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Submitted by Yorktown, NY

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