The federal government moves to the beat of cold molasses, so you shouldn’t be surprised that the US Department of Education it has yet to reveal how to apply for the student loan debt relief it promised in August.
But you still have to be patient because anyone who offers to help you now could be a scammer.
Kevin Roundy, Senior Technical Director at Internet Security Company NortonLifeLock in Culver City, said he has seen multiple scams targeting borrowers seeking guidance online about loan forgiveness. The goal, he said, is to get her to sign up for a service that will cost her money, or to refinance her debt with a new private student loan.
For example, he said, some will direct you to a site that tries to persuade you not to follow your student loan servicer’s advice. The site will claim that the administrator will give you poor terms, but “we’ll give you the best terms,” Roundy said. Or they will offer to take your debt forgiveness application directly to the Department of Education, bypassing your loan servicer.
But the reality is this: there is no better deal, and you will be able to apply directly to the department on your own.
“They’re trying to make it look like they’re cutting out the middleman,” Roundy said, when in fact they’re trying to insert themselves as the middleman.
Some try to phone you, promising lower monthly payments if you refinance your student loans through your chosen lender, Roundy said. But privately issued loans are not eligible for the debt forgiveness announced in August, or any of the other borrower-friendly options offered by the federal government.
The more people who visit the scammers’ sites, the higher they will appear in online search results, which in turn attracts more people to them.
Roundy said he has visited several of these sites, though he hasn’t seen one that mimics the Department of Education’s website. StudentAid.gov site, they still look very professional. “Unfortunately, one of the problems we have… [is] if we see a site that looks really fancy, we’re like, ‘Oh, this has to be legit,’” he said.
Online reviews of the sites show that “people realize pretty quickly that they’ve been scammed,” Roundy said. However, “they are having a hard time getting their money back.”
On its student loan portal, the Department of Education warn that scammers may try to lure you in by claiming that time is running out to get your loan forgiven. Other suggestions convey a similar sense of urgency, the department says, including: “Your student loans may qualify for full discharge. Enrollments are on a first-come, first-served basis” and “Student Alerts: Your student loan is marked for forgiveness pending verification. call now!”
This type of tone is a sure sign of a scam, the department says. Another clear sign is when someone asks you for money up front or on a monthly basis in exchange for full cancellation of the debt, the department says.
A third red flag is when a site asks for your Federal Student Aid username and password. The Department of Education “and its partners will never ask you for your FSA ID password. That’s a guarantee,” says the department’s website.
To avoid being misled, here are a few more things to remember.
1. There is no rush to apply. The Department of Education is expected to make the online application forms available in October, and you can sign up to be notified by email when the forms are available. You will need to have a studentaid.gov account, but you must still have one; You’ll need it to make sure your contact information and payment history are correct.
By the way, the department has said that borrowers who meet annual income limits (no more than $125,000 for a single person or $250,000 for a couple) will automatically qualify for loan forgiveness if they already have your income information. So if you’ve been filing annual income returns as part of an income-driven repayment plan, you shouldn’t have to file any forms to receive the loan forgiveness announced in August.
2. You do not need to pay anyone to get the promised loan forgiveness. There will be no fees involved, and the department says the form (if you need to apply) will be easy to fill out. Anyone who offers to help you for a fee is trying to take advantage of you.
Okay, your situation may be complicated; for example, he may have several different types of student loans, and if his parents still claim him as a dependent, his income, not yours, will determine his eligibility. But you should be able to navigate this by following the instructions laid out in StudentAid.gov.
3. Beware of anyone who requests confidential financial information. Scammers can’t get access to your student loan or bank account information unless you give it to them. So do not do it. And if a site claiming to be an official government agency requests this information, check its web address carefully; it may be a slightly altered version of the real thing.
4. No one can make all your debts disappear immediately. A common pitch by scammers is the promise of full and immediate debt forgiveness. It’s an offer they can’t keep.
The federal government has a number of programs that can forgive the debt after 10 to 25 years of monthly payments, but hardly instantaneous. Meanwhile, the new blanket forgiveness is capped at $10,000 (or $20,000 for borrowers who received Pell Grants), which is less than many borrowers owe. (And that plan is being challenged in court.) So instant, total debt relief is too good to be true.
5. You may need to consider your state tax bill. For now, the amount of debt forgiven under Biden’s overall plan would be taxed as income in California. The state’s top two lawmakers promised to pass a legislative fix before the taxes’ due date in April.
6. If you get scammed, you can limit the damage. The Department of Education advises people who realize they have been scammed to talk to their federal student loan servicer as soon as possible to block or reverse any changes.
Other steps recommended by the department include stopping all payments to the scammer from your bank or credit card company and filing a complaint with the Department the federal Consumer Financial Protection Bureau and the Federal Trade Commission.
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