The right way to get help with student loans
Currently, most federal student loans are free of all payments and interest until January 31, 2021. This means that if you have qualified federal student loans, you can continue to skip payments without worrying about interest or other consequences until February. It is also possible to extend this temporary leniency on federal student loans beyond the end of January 2021, so be sure to check this FSA page regularly for coronavirus updates.
On December 7, 2020, both the House of Representatives and the Senate passed new legislation aimed at establishing criminal penalties for those who knowingly obtain student loan information from the US Department of Education (ED) information technology system for “commercial gain” or their own financial situation. Violators could be fined, jailed for up to five years or both.
It remains to be seen whether ending student debt relief scams will become law, but even so, student borrowers should start looking at new (and old) student loan scams. The worst offenders have been low since Jan. 31, 2021, when interest and payments on federal student loans were suspended, but we can expect these bogus student-debt relief companies (and perhaps even some new ones) to return to full operation after bankruptcy.
The exit coaching is intended to further discourage fraud by warning students about so-called student debt relief companies. The law will also require the Ministry of Education to prevent hackers and thieves from accessing its database to obtain student aid, and to warn students if anything suspicious is found on their accounts.
To avoid student loan fraud, the first thing to watch out for is. According to the U.S. Department of Education, the basic theme is: “You don’t have to pay for help with federal financial aid or student loans.”
Unfortunately, too many companies are masquerading as debt relief companies that offer some form of help to student borrowers. These companies will typically charge you $1,000 or more for free services that you can obtain from the U.S. Department of Education, and may even try to steal your personal information or identity.
Often, you can easily spot fraudulent companies because they tend to make crazy demands, but it does help when you know what to look for. These companies may say you must pay for their help now, or you will miss the opportunity entirely. Others may guarantee that you will be eligible for more financial aid, which is just a rough sketch because third-party companies can’t do it.
Some companies may be more interested in getting your personal information than in helping you. For example, they may promise to eliminate some of your debt or help you qualify for more assistance, but only if you provide them with your credit card number or bank account information.
Also, keep in mind that you can contact your loan servicer to change certain loan terms. For example, you can switch from a standard 10-year payment plan to an extended payment plan to ensure a lower monthly payment. You can also check to see if you qualify for a service-based program such as an industry-specific loan forgiveness program or a public service loan Forgiveness (PSLF).
Finally, you can explore the possibility of repaying your loan with an income-oriented repayment plan. If you start getting emails or phone calls from companies that say they can make your student loan debt problem go away. They absolutely can’t help you in any way, they may actually be trying to steal your assets or identity, so don’t waste your time or money.
If any of the following occurs, you will absolutely know that you are dealing with a fraudulent company:
The system requires you to pay an upfront fee or a monthly assistance fee. It is illegal for companies to charge upfront fees to help with debt relief. It would be a huge red flag if the company asked you to pay anything.
The company you work with asks you to forgive your loan. According to the U.S. Department of Education, “there is no guarantee that loans will be forgiven or canceled immediately or in full.” Moreover, most government forgiveness programs require several years of qualifying payments and/or employment in qualified public service positions. If a company says they can make a special deal, they are not being honest.
You are required to provide your FSA ID or password. Please also note that the U.S. Department of Education will never ask for your FSA ID or password. If companies have access to this information, they can use it for a number of malicious purposes, including changing your account.
They want you to give them a power of attorney. This is a very clear sign of fraud. Run if the company requires legal authority to make decisions on your behalf.
Their communication didn’t seem professional. If you receive a printed message or email from a student debt relief company and it is full of grammatical errors, it is a good sign that the company is not legal.
You may also get a call from someone claiming on your loan and promising to offer a better student loan repayment plan, according to the FCC. The reality is that you can only make changes to federal student loans in collaboration with loan servicers and the U.S. Department of Education. If anyone from any company tells you otherwise, you should immediately stop communicating with them.
