Increasing Reports of Student Debt Relief Scams: What Borrowers Should Be Aware Of

As borrowers prepare to resume payments on their student loans after a prolonged pause of over three years, complaints regarding student debt relief scams are rising. This article delves into the various aspects of this issue, from the complex policy landscape to the methods scammers employ, and offers valuable insights to help borrowers protect themselves.
 

A Complex Landscape
 
The Biden administration's earnest efforts to provide relief to student loan borrowers have been met with subsequent legal challenges. The resumption of loan payments has further compounded the situation, creating an environment ripe for confusion and exploitation by unscrupulous companies.
 
Dan Zibel, vice president, chief counsel, and co-founder of Student Defense, a nonprofit dedicated to student rights, highlights the overwhelming barrage of policy and legal developments in recent years. "There is news about repayment plans, news about cancellation, different types of cancellation, whether it's public service loan forgiveness or fraud-based cancellation, the COVID pause, and then the courts get involved," he explained. "Debt forgiveness is happening. Debt forgiveness is not happening. There's new debt forgiveness... I think that sows confusion for a lot of people."
 
Vulnerable Borrowers at Risk
 
With a staggering 44 million borrowers collectively owing over $1.7 trillion in student debt, this issue becomes even more pressing. It's a situation that leaves many vulnerable to falling prey to scams promising relief.
 
Typically, these scams commence with a simple telemarketing call. In exchange for a fee, callers promise debt relief. They often request sensitive personal information and deceitfully claim to be affiliated with the U.S. Department of Education and student loan servicers. Some even mention "Biden Loan Forgiveness."
 
Escalating Complaints
 
Complaints to the Federal Trade Commission (FTC) regarding student debt relief scams have been steadily increasing in recent months. The numbers have surged from 385 in June to 562 in July and 610 in August, reflecting the growing urgency as the resumption of loan payments looms. In response, the FTC and the Department of Justice have taken substantial actions against scammers, returning millions of dollars to victims who paid upfront fees to companies like Ameritech Financial and Arete Financial Group. These companies falsely promised federal loan assistance.
 
Battling Deceptive Calls
 
To combat illegal telemarketing calls, the FTC is actively collaborating with law enforcement agencies and attorneys general. Some scams involve impostors posing as government or business entities, a tactic that deceives unsuspecting student loan borrowers.
 
The Ongoing Efforts
 
The Biden administration has made multiple attempts to alleviate the burden of student loan debt. One notable effort was a program announced in August 2022 that could have canceled up to $20,000 of federal student loans for eligible borrowers. However, the U.S. Supreme Court ruled against the plan in June, leading to the introduction of the SAVE Plan. This new income-driven repayment program offers benefits such as zero monthly payments for some low-income borrowers and early student loan cancellation for others. Students defrauded by for-profit colleges continue to receive loan cancellations as well.
 
Protecting Oneself
 
These scams target vulnerable borrowers, including those facing economic hardship or language barriers. However, even individuals who consider themselves savvy can fall victim to increasingly sophisticated schemes. Kyra Taylor, a National Consumer Law Center staff attorney, warns that scammers have become adept at spoofing student loan servicer emails, making it challenging to discern genuine communications from fraudulent ones. Therefore, it's crucial for anyone, especially those receiving seemingly legitimate emails from their student loan servicers, to exercise caution when confronted with these deceptive tactics.