The Biden administration is stepping up efforts to crack down on scams aimed at taking advantage of borrowers applying for its sweeping student loan forgiveness plan, senior administration officials said announced Wednesday.
That of the administration forgiveness program will forgive up to $20,000 in student loan debt for borrowers earning less than $125,000 or $250,000 for households. The plan, which is expected to cost $400 billioncould benefit up to 40 million Americans.
Since announcing the relief in August, the administration has released very little concrete information about what the app will look like or when it will be released. This void has created an opportunity for scammers: As NPR reported last month, some borrowers have already met student loan scams and misinformation in text messages, phone calls and emails, and experts say it’s getting worse.
“This Biden forgiveness thing is Christmas, Thanksgiving and July 4 all rolled into one for the crooks,” says Betsy Mayotte, president of the Institute of Student Loan Advisors, a nonprofit that offers free counseling to borrowers.
“The exit they made today is a big step,” added Mayotte. “There are only two things we can do as a community [to prevent fraud]. One is to educate borrowers and the other is enforcement.”
The administration aims to do both.
To hold scammers accountable, the administration plans to increase collaboration between the Department of Education and other federal agencies, including the Federal Trade Commission and the Consumer Financial Protection Bureau. The administration will also share scam complaints more frequently with states, so state attorneys general can act more quickly to stop scams in their own jurisdictions, and plans to partner with social media influencers as part of the process. of a public awareness campaign.
“It’s a whole-of-government approach, because what we know is that this is already happening, that there are bad people who will try to use a program like this, who will try to help people , and will run their own cheats and scams to get money one way or another or personal information about people,” says Richard Cordray, chief operating officer of Federal Student Aid, an arm of the Department education.
“What we’re trying to do here is provide as much relief as possible to hard-working former students who deserve that relief,” Cordray added. “We are moving full speed ahead to get the application and the process here.”
Canceling student loans was ripe for fraud long before the Biden administration’s sweeping plans to write off debt. According to a July report from the Tech Transparency Project, more than 10% Google ads appearing in searches related to student loan forgiveness were fraudulent. And over the past year and a half, the FTC has reached nearly $30 million in settlements for borrowers who were falsely promised relief on their student loan repayments.
The administration’s efforts to stop these types of scams rest heavily on the shoulders of the borrowers themselves: Much of the announced plans focus on increasing efforts to educate the public on how to catch and report scams on their own.
“You are your own best protection against scammers,” says Cordray, who was also the former director of the CFPB.
The White House has also released a “Dos and Don’ts” tip sheet. Among the tips included:
- Don’t pay anyone who promises loan forgiveness. The application will be free.
- Do not give anyone personal account information for the Federal Student Aid website. The Department of Education and Federal Student Loans Services will not call or email requesting this information.
- Do not give personal or financial information over the phone to an unfamiliar caller. If in doubt, borrowers should hang up and call their loan servicer directly.
The administration urged borrowers to sign up to be notified when the app is available, to ensure that their loan officers have their current contact details and to report any scams they meet at the FTC.
This month, the application window for student debt relief will open.
Learn more about what to do in advance and how to avoid student debt relief scams. pic.twitter.com/76ERkrvEAr
— The White House (@WhiteHouse) October 5, 2022
One way to avoid vulnerability to scams in the first place would be to post more specific information about what the forgiveness app will look like or when to expect it.
“One of the most critical ways to prevent scams and protect borrowers from abuse is to develop a clear, simple and secure site for borrowers to apply for debt relief and have the most up-to-date information. from reliable sources,” the administration said. written in a fact sheet outlining their efforts to combat scams.
But in a Wednesday briefing, senior administration officials did not provide more concrete details on when the app will go live or what the process will look like.
Mayotte says publishing the app might not be very helpful in preventing bad actors.
“In a way, that will help,” she says. “But if I know the scammers, they will also take advantage: “The app is out. You must hurry. Hurry up. Now that the apps are out, let us help you make sure you don’t miss it.’ So it’s a catch-22.”