VSAC will be closed Monday, January 17, 2022 in observance of Martin Luther King, Jr. Day.
VSAC Ready to Help You Avoid Student Loan Scammers
With the recent news about changes in the Public Service Loan Forgiveness program and the expected restart of federal student loan repayment in February 2022, confusion and change often bring out the scammers and false promises of having student loans forgiven and convincing people to pay for information that is free.
This past year, Vermont Student Assistance Corp. (VSAC) issued $36.1 million in its Vermont Advantage loans and serviced $610 million in federal and private loans. And VSAC’s financial aid counselors work with more than 43,000 Vermonters and other borrowers every year to provide free counseling and information about student loans and repayment.
VSAC President Scott Giles and Vermont Assistant Attorney General Merideth Chaudior recently joined Across the Fence host Fran Stoddard to talk about how to avoid being scammed and what to do if you think you may be a victim of fraud. Watch the loan fraud episode of Across the Fence, the daily UVM Extension public affairs program on WCAX weekdays at 12:15 p.m.
You can also get help from the Vermont Attorney General’s Consumer Assistance Program by calling (800) 649-2424 or email email@example.com.
What to Watch for to Avoid Being Scammed
A recent article on Nerdwallet noted that hundreds of private companies lure struggling borrowers with promises of student debt relief, when in fact all they do is charge to enroll student loan holders in free federal programs.
While not all such companies are scams, bad actors are rampant. More than 130 student debt relief entities have histories that give consumers a reason to be wary, according to a 2017 NerdWallet public records investigation.
In January 2020, the Consumer Financial Protection Bureau sued 26 defendants involved in a student loan repayment scam in which a company falsely told borrowers that in exchange for fees, the company would improve their credit score, get them a lower interest rate by consolidating loans and make the U.S. Department of Education their new servicer.
Even if it's not a scam — if the company does what it promises to do — it's still probably charging you a lot of money for something that’s free and relatively simple to do yourself.
Nerdwallet noted that knowing the warning signs of a potentially harmful company can save consumers hundreds of dollars in unnecessary fees. Don’t be misled by an official-sounding name like “Student Advisory Board.” Here are five red flags to look for and tips on what to do instead.
1. You have to pay upfront or monthly fees to get help
There’s nothing a debt relief company can do that you can’t do on your own. And it’s not illegal for companies to charge for services you could do for free. Some people compare student debt relief services with tax preparation.
But it is illegal for student debt relief companies to collect fees over the phone before they lower or settle a customer’s loans.
What to do instead: Go to studentaid.gov to apply for an income-driven repayment plan, learn about government forgiveness plans or consolidate your federal loans — all for free. If you have private loans, contact your lender or servicer to discuss alternative repayment plans. Borrowers with federal or private loans can request a temporary pause on payments by asking for deferment or forbearance. If you take this route, though, interest will continue to accrue, increasing your loan balance.
If you want expert help in navigating your options, contact a student loan counselor certified by the National Foundation for Credit Counseling. Some nonprofit credit counseling agencies charge a one-time fee ranging from $50 to $200, but they offer trustworthy advice for a fraction of what you’d pay to a for-profit company.
2. The company promises immediate loan forgiveness
Be wary of companies that claim to help you get loan forgiveness. There are legitimate government programs, such as Public Service Loan Forgiveness, that can reduce or eliminate federal student loans after a certain amount of time. However, only some individuals qualify for the programs.
For instance, borrowers must work full-time for the government or a 501(c)(3) nonprofit organization and make full monthly payments for at least 10 years before earning forgiveness through PSLF. Borrowers on income-driven repayment plans can get their remaining loans forgiven after they make payments for 20 or 25 years, depending on the plan.
What to do instead: Use Federal Student Aid’s Repayment Estimator to see your monthly payment and projected loan forgiveness on various plans, based on your income and family size.
If you work in public service, make sure you understand the details of Public Service Loan Forgiveness. If you decide to pursue it, begin by submitting a PSLF employment certification form to confirm your employment qualifies.
3. A salesperson pressures you into signing up
Companies selling student debt relief services are typically staffed by sales representatives who earn commissions based on the number of customers they sign up. They may aim to instill a sense of urgency, saying things like, “Sign up now before it’s too late!”
But you do have time to make careful, well-researched decisions about your debt. There are no legitimate loan programs that are available only for short periods of time.
What to do instead: If you’re unsure about the legitimacy of a company, do more research before committing to anything.
Ask the company some questions like, “Are you affiliated with the Department of Education?” and “Can I do this on my own for free?” Honest companies will tell you that they’re not associated with the Department and that you can apply for the help you need without paying for it.
Fraudulent student loan relief companies have been known to deceive borrowers by feigning relationships with the Department of Education. However, the agency contracts only with certain private student-loan servicers.
4. You’re asked to share sensitive personal information
Some companies may ask for borrowers to provide Federal Student Aid IDs or Social Security numbers. The data give the businesses the ability to sign into your account and make decisions on your behalf. Legitimate sources of student loan help, such as NFCC-affiliated nonprofit credit counseling agencies, do not ask for such information.
Additionally, some debt relief companies may ask borrowers to sign a power of attorney agreement, which would allow the businesses to communicate with your loan servicer in your name. You’re not obligated to sign such documents; in fact, doing so may cause you to lose access to your student loan account.
What to do instead: Don’t reveal your FSA ID or Social Security number or sign a power of attorney agreement. If you’ve already done so, contact your loan servicer, explain the situation, and regain control of your account. Resume making payments directly to your loan servicer if you stopped doing so.
5. The company advertises on social media or shows up in search engine ads
Borrowers should automatically view student loan assistance companies that pay to advertise their services with skepticism, says Robyn Smith, an attorney with nonprofit legal advocacy group the National Consumer Law Center. It usually means they’re in the business for profit, and since you never have to pay to consolidate your federal loans or to switch repayment plans, that’s a sign the services they offer could be a scheme to mislead you into paying for otherwise free assistance.
Former CFPB student loan ombudsman Rohit Chopra wrote in a 2015 letter warning Google that some companies may be misrepresenting themselves in online ads. “While we have warned consumers about these scams, we are concerned that unscrupulous companies may be using aggressive advertising through search products to lure distressed borrowers,” Chopra said.
Additionally, some companies use advertisements to create lists of potential customers to sell to other companies. These so-called lead generators often ask consumers to input personal information on web forms or call a phone number for more details. They then sell the data they collect to student debt relief companies.
What to do instead: Do research before responding to advertisements. Avoid providing personal information to online forms that aren't applications for legitimate programs.
Read the full article at https://www.nerdwallet.com/article/loans/student-loans/how-to-spot-student-loan-scam
For information on college and career planning and help with financial aid, go to www.vsac.org/FAFSAfirst and check out our online workshops and events. For an update on how we can help with the impact of Covid-19, click here. You can also give us a call at 800-642-3177, 8 a.m. to 4:30 p.m., Monday through Friday, and online at firstname.lastname@example.org.