Student Loan Relief Scams-COVID 19

Taking the advantage of pandemic crisis, a lot of portals try to collect a lot of personal information which disable the borrowers to opt the relief options available though the borrowers are eligible. Student loan relief scams, how they work and whom to report if scammed is veru

Updated by Vinitha Reddy on 5th July 2020

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Student Loan Relief Scams-COVID 19

Student loan borrowers are always targets for scams online before the CORONAVIRUS outbreak hit globally. The more people struggle in terms of paying for the loans, the more desperate they become to look for the options available for easy access, and that’s when the student loan borrowers fall into the traps of scammers and fraudsters. ‘They’re using the same playbook, which aims to help student loan borrowers get the information they need to make informed choices about getting an affordable monthly payment more aggressively,’ says Seth Frotman, executive director of the Student Borrower Protection Center, a Washington, DC-based nonprofit organization. Multiple Student loan relief programs during COVID-19 are published both by the ED and many private lenders also have release programs in the form of extending forbearance period to support its customers. As COVID-19 cases and deaths are increasing, the ED has decided to release Student loan relief extension - COVID-19 to help the borrowers during this period. 

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Student loan relief scams victims 

‘They’re using the same playbook, which aims to help student loan borrowers get the information they need to make informed choices about getting an affordable monthly payment more aggressively,’ says Seth Frotman, executive director of the Student Borrower Protection Center, a Washington, DC-based nonprofit organization.

Even though there is no single scam related to coronavirus relief or any specific company to pinpoint that it is being prosecuted right now, says Leslie Tayne, a debt-relief attorney and founder of Tayne Law Group. Fraudsters online are inevitable and are still out there.

Student Loan Relief with CARES Act was signed in March to support American workers, businesses, and save jobs for Americans.

Types of student loan relief scams during COVID-19 

There are two main types of promising scams in which the netizens may get deceived easily. They are:

  • A company will charge to enroll you in a benefit saying that you could have accessed for free, such as a federal income-driven repayment plan. Most often scammers promise borrowers to get into a loan deferment program in exchange for payment.

  • In another scam, the students are promised something too good to be true ” like the loan forgiveness ” in exchange for payment at a cost. Where students are forced to pay the amount insisted. This was called the Obama Loan Forgiveness scam. And now we have the CARES Act Forgiveness scam,’ says Persis Yu, director of the nonprofit National Consumer Law Center’s Student Loan Borrower Assistance Project. “Borrowers should always look keenly upon advertising that is promising forgiveness with skepticism,” says Yu. No credible student loan forgiveness was included in the March coronavirus relief package.

How to identify student loan relief scams COVID-19

  • You have to pay upfront or monthly fees to get help

  • The company promises immediate loan forgiveness

  • A salesperson pressures you into signing up

  • You’re asked to share sensitive personal information

  • The company advertises on social media or shows up in search engine ads. 

Authentic relief measures 

The coronavirus relief package includes opportunities for most federal student loan borrowers. However, this plan stands unfair for private loan borrowers. Additionally, the Individual private lenders are offering benefits such as short-term emergency deferment or waived late fees exclusively for private loan borrowers.

On the other hand, the federal loan borrowers are in the midst of a six-month automatic forbearance or relief, “ with no interest ” retroactive to the CARES act signed on March 13, 2020, and lasting through September 30, 2020. Beneficially, the borrowers with loans in default also get relief from collection activities like wage garnishment, etc.,

However, the implementation of these benefits to be student loan borrowers hasn’t been smooth. The National Consumer Law Center and another non-profit organization, The Student Defense, sued the U.S. Department of Education over allegations that the department continued garnishing wages despite the law that prohibits it.

Implementation delays have left borrowers more vulnerable to getting scammed, says Yu. The student loan borrowers are desperate, and they might be entitled to relief and they’re not getting it,’ she says. ‘Our policymakers and the Department of Education need to act upon to get this right so that the borrowers are not driven to companies leeching off their desperation.’

You should be receiving all relief automatically for federal loans as per the CARES act and if you’re not, contact your servicer immediately and make a complaint in writing. 

Student loan relief - Scammed - What to do? 

If you are scammed, the first thing you need to do is get control of your accounts. One of the most common things of these scams is that the company will take over the FSA ID or servicer account and redirect any communications to that company. (The FSA ID is the unique username and password used by you to log into the federal student aid online portal.)

  • If you’ve given a scam company your password, immediately change your password. You may need to change the email address as well if your account is linked to it.

  • Make sure to report the scam to authorities as well and hold onto and have copies of those reports.

  • The Federal Trade Commission, your state attorney general, and the Consumer Financial Protection Bureau are direct options for reporting scams. Each and everyone actively pursues student loan scammers, but they tend to rely on borrowers to self-report.

  • If you’re looking to take legal action and you’re income-eligible, contact a legal services organization if or you could hire a lawyer.

Note: The borrowers sometimes get their money back, but it takes effort.

How to report the student loan scam COVID-19

If you encounter a deceitful experience with a company, file complaints with the 

  • CFPB, 

  • The Federal Trade Commission and 

  • Your state attorney general’s office. 

These agencies take the consumer complaints and revert them to the police about the harmful student loan companies and, when possible, try to get borrowers’ money back.

Student debt relief companies have come up because filling out the necessary paperwork can be complicated and time-consuming. But if you arm yourself with the right information and the details about the scam, you’ll know how to ask the government for free help and you won’t lose money on a scam. Just like the CARES Act, Student loan relief and Heroes Act was introduced to help borrowers who are struggling to repay their student loans. Student loan relief summarizes all the acts published by the ED during the pandemic.