Anyone saddled by debt would love a quick way out. After all, it isn’t easy to be constantly squeezed and stressed out from more debt than you want.
Unfortunately, though, unless you’ve won the lottery or suddenly inherited millions, there really is no way but the slow way. You’ll need to make those monthly payments steadily until the day your loans are all fully paid.
But that’s not what dozens of scammers would have you believe. In a recent crackdown on student loan relief scams, the Federal Trade Commission (FTC) has revealed that Americans have been collectively conned out of nearly $100 million by these scammers.
More than 42 million Americans have student loan debt, with their outstanding balances totaling more than $1.4 trillion. This makes student loan debt the second largest segment of U.S. debt, topped only by mortgages. It also makes these borrowers the perfect targets for scams.
The FTC, partnering with 11 states and the District of Columbia, has recently announced “Operation Game of Loans,” the first federal-state law enforcement initiative pursuing deceptive student loan debt relief scams. This nationwide crackdown includes 36 government actions against scammers alleged to have used deception and false promises to bilk more than $95 million from victims.
The operation has already charged more than 30 organizations with unlawful schemes. The organizations have been accused of falsely claiming to be affiliated with the Department of Education, misleading advertising and collecting upfront fees with deceptive intent.
In a typical scam, the “organization” will promise to use the victim’s money for paying down their debt, reducing their monthly payments or even forgiving their loans entirely. In truth, the scammer has no intention of doing any of that, and is instead enjoying an easy payday courtesy of the victim’s hard-earned money.
Most organizations targeted in this crackdown claim to “assist” student loan debtors, but several defendants have also victimized desperate homeowners, making false promises to consumers that they would provide mortgage relief and prevent foreclosure. As with the student loan scams, these payments went toward lining the scammers’ pockets and made no dent in the victim’s’ mortgages.
If you are currently paying off a student loan, educate yourself so you don’t fall prey to these scams. There is legitimate help available for students struggling to repay their debt; you just need to make sure it’s the right kind of help.
Here’s how to protect yourself:
1. Visit the FTC site
The FTC has recently updated its consumer education on student loan debt relief scams. You can read up on the warnings at ftc.gov/StudentLoans. As a follow-up to “Operation Game of Loans,” the FTC will be hosting a live online panel in late October. The panel will include a Twitter chat with state attorneys general and a Facebook Live session with experts detailing ways to avoid student loan debt relief scams. Be sure to check the FTC website for updates on this and future scheduled panels.
2. Know that there’s no fast way out
When seeking help with a loan, it’s important to remember that there will never be a quick and easy way out. Only scammers will promise fast loan forgiveness. If you come across a company offering to get rid of your debt within the month, run the other way and don’t look back.
3. No upfront fees or shared information
You should never have to pay for a service before it’s been rendered. If you’re asked to pay a fee as soon as you’ve made contact with a debt relief organization, that’s a sure sign you’re being scammed. Legitimate organizations will only ask to be paid after they’ve helped you out.
On a similar note, be careful about sharing sensitive information. Don’t share your FSA ID (the username and password used to log in to U.S. Department of Education websites) with anyone.
4. Verify affiliation
To appear legitimate and attract victims, scammers often claim that they are affiliated with a governmental body or with a private loan company. It’s easy to make these claims, but it’s a lot harder to prove. The best way to confirm that you’re dealing with an authentic entity is to contact these agencies yourself.
You can apply for loan deferments, forbearance, repayment and forgiveness or discharge programs directly through the U.S. Department of Education or their loan servicer. These applications are completely cost-free and you will never need the assistance of a third-party company to avail yourself of these services. To review your options, visit StudentAid.gov/repay. For private student loans, contact your loan servicer directly to be certain you’ve reached the right party.
If you feel like you’re in over your head with your student loan payments, don’t hesitate to call, click or stop by FSU Credit Union today. We’re always available to help you manage your money in the best way possible and maximize your financial well-being.