IMPORTANT COVID-19 UPDATE: If your income has gone down suddenly due to a layoff or reduction of hours, you may be eligible to have your student loan payment reduced through a federal income-driven repayment program. Please visit the new automatic sign-up tool that our partners at Savi created to help NEA members dealing with the economic impacts of the novel coronavirus.
Unfortunately, headlines like “Company targeted teachers in student loan scam” and “Teacher loses thousands of dollars in student debt relief fraud” are all-too-common now, as educators have increasingly become a prime target for bad actors posing as trusted student loan servicers.
Why is this happening, and why are educators being singled out? There are two main reasons:
- Teacher debt loads have surged. As more teachers pursue graduate degrees, their student loan burden has deepened. Between 2000 and 2016 (the latest data available), average loan balances rose by 71%—from $32,200 to $55,200—for those completing a master’s degree in education, according to the National Postsecondary Student Aid Study.
- Teacher pay lags other professions. The national average teacher salary, adjusted for inflation, has decreased 4.5% over the past decade, according to NEA’s annual Rankings and Estimates report. What’s more, teachers today are paid a record 21.4% less than similarly educated and experienced professionals, according to a 2019 Economic Policy Institute report.
The result: Dueling trends of increasing debt and decreasing income create fertile ground for fraudsters to prey on already stretched borrowers who are seeking relief. And as student loan debt grows overall, so do scams with false promises of debt forgiveness or reduced loan payments.
With coronavirus relief measures legitimately offering aid to some borrowers now, scammers are taking advantage. The CARES Act, which went into effect in late March, allows for the automatic suspension of payments on federal student loan debt through September 2020. No fee is required, so don’t believe anyone who contacts you and claims otherwise.
Also, this new law doesn’t cover private loans. The best way to see if your private student loan servicer will give you temporarily relief is to contact them directly. You also can check the new Savi calculator to see if you can qualify for income-based payment adjustments now, especially if you’ve lost your job or had your hours reduced.
‘It sounded legitimate’
Mimi H., a former public high school teacher in Colorado, was the victim of one of those convincing student loan scam calls. When she answered her cellphone during her lunch break in the teacher’s lounge, the caller knew Mimi’s name and a few other details, and even identified herself as a Department of Education representative.
“She said, ‘We’d like to lower your monthly payment on your student loans,’ ” Mimi recalls. “I was told I qualified for a lower payment plan as a teacher. It sounded legitimate.”
Mimi acted on the woman’s offer. “Before I knew what I was doing, I was sending over a signed piece of paper that I thought was supposed to save me from financial peril,” she says. “I didn’t realize the error of my ways until many months later.”
Mimi’s monthly loan payments had indeed been reduced—from $240 to $108. However, those payments were being deducted from her bank account by a fake company that claimed to have consolidated her existing loans and changed her repayment plan to produce the lower amount.
Nine months later, Mimi discovered the fraud—only after receiving mail from her original loan servicer showing that no payments had ever been made on her behalf from the bogus firm.
“I was out almost $1,000, and they’d created a new account with my real federal loan company, using a fake email address and password so that I couldn’t access the truth,” Mimi says.
After discovering the hoax, she contacted her bank—closing her existing account and reopening a new one. But because she had unknowingly authorized the fraudulent payments to be made from the account, the bank was unable to recover or reimburse any funds.
“I never got that money back and none of it ever went towards paying my student loans,” she says.
And despite her efforts to stop the scammers—including filing complaints with her state attorney general’s office and the Better Business Bureau—Mimi is unaware of any action being taken against them yet.
“I also tried to contact the scammers repeatedly, but I think they were onto the fact that I discovered them,” she says. “They must have blocked my calls.” Unfortunately for Mimi, the scam was complete, and the phony company moved on.
4 red flags to help you identify debt relief scams
Often pitched through robocalls, social media, emails or texts, student loan debt relief scams tend to use similar deceptions to lure unsuspecting consumers who are searching for ways to manage their repayments.
How can you tell a legitimate student loan debt refinancing or forgiveness option vs. a scam through a bogus company? By being aware of some key warning signs of a potentially fraudulent offer, you can save yourself from making a major financial misstep.
Here are four red flags to watch for—and some tips to protect yourself.
1. They use public information and imply legitimate connections to give the appearance of credibility
Many scams suggest false affiliations with the Department of Education or official endorsements of consumer loan servicers. They also may feign special access to certain repayment plans, new federal loan consolidations or loan forgiveness programs.
To be more believable, they may try to personalize your solicitations with readily available details about your name, location, school and job that cause you to assume they’re familiar with your existing student loan debt information.
- Fact: The federal government doesn’t approve or recommend any debt relief companies. The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) share oversight of such types of companies, and the two agencies have handled approximately 20,600 complaints related to private or federal student loans in the past two years. You can scan a current list of companies banned from participating in debt relief business on the FTC site.
2. They require upfront fees
In exchange for assistance with student loan debt relief, forgiveness and consolidation help, some companies may advertise initial fees, require “pre-approval” costs, charge a monthly service fee, or set a one-time charge based on a percentage of your loan balance amount.
- Fact: It’s illegal for debt relief businesses to charge consumers before they help them, according to the FTC. And you don’t have to pay anything for advice from your loan servicer. All loan-management options available to you through the Department of Education and federal student loan servicers are always free.
3. They promise quick, full loan forgiveness if you act fast
Before they know the details of your situation, scammers might say they can quickly get rid of your loans through a loan forgiveness program. Or they might imply they’ll wipe out your loan balances by disputing them using an updated review of your terms or by applying “new” student loan rules or laws—but only if you sign up right away or meet a deadline.
- Fact: No company can deliver immediate loan forgiveness, don’t feel pressured to rush into a decision that could turn out to be a bad one. Only certain types of federal student loans qualify for full or partial loan forgiveness. As an educator, you indeed may qualify for one or more of these programs—such as Teacher Loan Forgiveness, Public Service Loan Forgiveness, or Teacher Loan Cancellation. Check the NEA Student Debt Navigator to see what you might be able to qualify for based on your own situation.
4. They claim they need to use your Federal Student Aid (FSA) login credentials
Fraudsters may say they require your personal username and password to access your financial aid data in order to secure better loan terms, apply for debt relief programs or consolidate and convert repayment options. Even worse, they’ll say you must establish new ones for your debt relief to take effect. They may even ask you to sign a power of attorney document, giving them the legal ability to conduct financial matters and deal with government and other loan servicers on your behalf.
- Fact: Your FSA ID serves as your legal signature. It’s illegal to create an FSA ID on behalf of someone else or to let an employee or agent of a commercial third party create an FSA ID for you for any reason—including loan payment reductions and debt consolidation. Never disclose your FSA ID verbally or in an email, or sign sweeping legal authorizations in connection with student loans. Doing so not only gives scammers access to your personal account and the means to change and divert your personal information, but it also opens the door to even greater threats of identity theft and financial abuse. Legitimate companies will keep any personal information that they may need to help you safe and secure.
What to do if you think you’re being scammed
If you believe you may be a victim of a bogus company’s student loan scam, reset your FSA ID password and notify your loan servicer. Contact the Department of Education’s Office of Inspector General hotline or Federal Student Aid Ombudsman. And, if you think you may have had your financial identity compromised beyond your student debt information, then follow the steps that apply to your situation at IdentityTheft.gov.
Legitimate ways to reduce your student loan debt
The NEA has heard from thousands of members about how student loans impact their lives and jeopardize careers in education. To help, NEA Member Benefits reached out to and vetted Savi, a registered public benefit company that helps borrowers manage student loan debt by providing information about federal forgiveness programs, income-based repayment and other repayment options. As a trusted partner, we encourage NEA members to use Savi’s information and tools to help evaluate student debt and learn ways to lessen its impact.
NEA members have access to Savi through the NEA Student Debt Navigator. This tool can help you assess whether you qualify for free federal loan forgiveness programs, among other options. On average, Savi users are seeing more than $2,100 a year in new savings through this tool and an average of $34,500 in potential forgiveness, and the numbers keep growing. There is no cost to use the evaluation tool, and you’ll have access to expert assistance via telephone or chat.
If you find you’re eligible for loan forgiveness or an income repayment plan, you can print out the paperwork for free and file with the Department of Education. To submit paperwork electronically, which can help reduce the likelihood of filing errors and improve your odds of getting your application approved, NEA members can do so through the NEA Student Debt Navigator at a discounted cost.