Protect yourself against student loan forgiveness scams – Forbes Advisor

With the Biden administration’s announcement to forgive up to $20,000 in federal student loan debt for low-to-middle income borrowers, many consumers see a chance to gain some financial traction. Unfortunately, the scammers recognized the same opportunity.

Student loan forgiveness scams have already been on the rise since the announcement. Here are the signs to look out for and how to protect your personal information.

How to Avoid Student Loan Forgiveness Scams

Don’t pay a fee, forgiveness is free

One of the most prolific student loan scams is a company saying you have to pay to be eligible for student loan forgiveness. Scammers may even say they can get your entire student loan balance forgiven, even if it is more than the amount announced by President Biden.

It is always free to apply for federal loan forgiveness programs, and paying a fee will not speed up the process or increase your chances of approval. If a company promises to expedite your application in exchange for a fee, they are trying to scam you.

“Usually they’ll approach you with something that seems too good to be true,” said internet security and fraud expert Adam Levin, host of the podcast. What the hack with Adam Levin. “It’s anything to trick you into acting impulsively and providing money or providing personally identifiable information.”

It is also important to know that the federal government will not contact you by phone to discuss your student loans. “The real Department of Education won’t call you, just like the IRS won’t call you,” Levin said.

Protect your personal information

Phishing scams are a common way fraudsters gain access to consumers’ personal information. You may receive an email or text message that looks legitimate asking you to share details about yourself or your account, but it is actually a scammer trying to steal sensitive data.

For example, suppose you receive a phishing email claiming to be from the Ministry of Education. It may include Ministry of Education official logo and sender email address may look real but after clicking on provided link you are redirected to fake site which asks for your personal information.

If you provide information such as your social security number or account details, hackers can use this data to steal your identity, open credit cards or loans in your name, or gain access to your existing accounts. Levin said you should also never open attachments in a suspicious email, as they may contain ransomware which can be used to steal your information.

To spot a phishing scam, ask yourself if you actually have an account with the company before clicking anything. Look for typos and incorrect grammar in the text; generic greetings such as “Hello customer” can also be a red flag. Review the URL that is linked in the email and watch for subtle misspellings or odd formatting.

Finally, find the company’s contact information in the email. If it’s not included, that’s another red flag. If in doubt, contact the company directly to confirm any necessary action on your account.

Examine reliable sources of information

Over the past two years, there have been many changes to the federal student loan programs, including Covid-19 student loan forbearance and civil service loan forgiveness. And with Biden’s recent pardon announcement promising large-scale relief, there’s plenty of new information to parse.

If you receive a phone call, email, or text message with too-good-to-be-true claims, don’t feel obligated to hand over your information. Take the time to verify claims on trusted websites and make sure you are actually communicating with a reputable source.

To ensure you get the right information, stick to official sources such as the Federal Student Aid website and your student loan service. You can also sign up for updates from the Department of Education to receive notifications about student loan forgiveness.

Wait to refinance

There have been anecdotal reports of some loan servicers encouraging borrowers to refinance their student loans before interest rates rise again. As interest rates rise, refinancing federal student loans will affect your eligibility for forgiveness.

When you refinance federal student loans, they become private debt and will no longer be eligible for federal benefits such as income-based repayment plans, extended forbearance plans, and most importantly, loan forgiveness options.

If you refinance your federal loans right now, you’ll miss Biden’s loan cancellation. There is no way to undo the refinance; it is definitive and permanent. Thoroughly research the pros and cons of refinancing federal student loans before taking action — and if you’re eligible for Biden’s pardon opportunity, wait until it’s fully processed before refinancing.

What to do if you think you’ve been scammed

Contact your bank or credit card company

If you mistakenly pay a company to help cancel your loan, you can try to get your money back through your bank or credit card company.

Call your bank or credit card issuer’s anti-fraud department as soon as possible, even if the money hasn’t been withdrawn from your account yet. The bank can close your account, send you a new card or put an alert on your account for any suspicious withdrawals. The representative should also be able to explain your eligibility for reimbursement of lost money.

File a complaint

If you have been scammed, contact the official Federal Student Aid website to file a complaint. You can also report fraud to the Federal Trade Commission and your state attorney general’s office. Filing a complaint can help you get your money back, and it will also alert authorities to new scams and raise awareness.

Use your identity theft insurance

Some renters and homeowners insurance policies include identity theft coverage, or you may have chosen to add it to your standard policy. If you have this coverage, the insurance company can help pay for expenses incurred while trying to recover your identity.

Levin says insurance companies can also provide access to trained fraud experts who will guide you through the process. Reversing the damage caused by identity theft can be a stressful and time-consuming process, so having a professional in your area could be a real help.