The government's one-time federal student loan debt relief program is currently blocked, but for many, student loan scams continue to be a nuisance. Fraudsters may pose as government agents, financial advisors, or loan servicers in order to trick people into sharing money or personal information in exchange for loan forgiveness. But any promise of an easy way out of debt is likely a scam.
Last August, the government announced plans for a student debt forgiveness program that would benefit roughly 43 million Americans.
But now, that program is blocked by court order, pending a ruling from the Supreme Court. In the meanwhile, Education Department officials are proposing new ways to make student loan debt repayment more manageable.
Scammers are known to take advantage of government programs that provide financial help or benefits. Now, they’re trying to cash in by exploiting the uncertainty surrounding student debt relief programs.
As a result, misinformation about this topic has spread online. If you or someone you love has student loans, knowledge is the best line of defense.
So know this: It doesn’t cost any money to apply for debt relief. For the latest on the status of the federal student debt relief program, only check official government sites, like studentaid.gov.
And, while the government’s one-time federal student loan debt relief program is blocked, keep in mind that any offer of a quick fix for your loan is likely a scam.
A closer look at common student loan scams
Our recent Identity Fraud in Focus report noted that student loan forgiveness scams are booming.
Fraudsters may reach out with promises of student debt relief via email or text. Do not give them your personal or financial information.
Student loan scam calls are common, too. Wondering what fraudsters might say if they get you on the line? Listen to this recent NPR report that features real voicemails left by student loan scammers.
Bad actors may also run ads about student debt relief on search engines and social media, luring people to phony sites. Those who are actively searching for updates and information on student loan forgiveness may be vulnerable to these phishing campaigns. So, as we mentioned, stick with trusted government sources for the latest news on debt relief.
These criminals can be relentless; in a recent survey conducted on behalf of Allstate by Morning Consult, 40 percent of people who reported being targeted by a student loan scam said they've been contacted by fraudsters at least once a week.
To stay safe, approach any communication about student loans with caution, and keep an eye out for the following schemes:
Someone contacts you claiming to work for a company that can help you apply — or quickly receive — student loan forgiveness debt relief. They often charge a fee to do so: money that you won’t get back. The Better Business Bureau (BBB) recently reported that in scams like these, the fraudster might even get ahold of personal information about victims before contacting them — like their name, graduation date, and other details from their FAFSA (Free Application for Federal Student Aid) form — making this scam especially convincing. Also, keep in mind that private loans are not included in the federal debt forgiveness plan, so promises of private student loan forgiveness or debt relief are a sign of trouble as well.
Someone claims to be a government employee, and requests personally identifiable information (PII) — like your Social Security number or Federal Student Aid ID (FSA ID). They might say they work for the Department of Education (ED) or a federal loan servicer, and claim that they need this information to make you eligible for debt relief — but the government won’t make initial contact with you this way.
Someone offers to help you apply for a scholarship or grant in exchange for a fee. In this scam, a fraudster typically targets rising college students and their parents. Brian Stuart, Director of Customer Care at Allstate Identity Protection, warns that whenever a person or company offers to complete a FAFSA form or submit applications for scholarships on your behalf, it’s likely a scam. Especially if they guarantee that they can get you or your child a scholarship, or say that an application requires no essay, video, transcript, etc.
Scams we've seen
“Whenever you give away your personal information, you're opening yourself up to any kind of scam. In many student loan scams, you likely didn’t actually apply for a real scholarship or debt forgiveness — but you did put your information out there, and now fraudsters could use it to their advantage.”
How to spot a student loan scam
Whether you’re a student, graduate, or the parent or guardian of a student whose education is being supported by student loans, you might be targeted by scammers.
Fortunately, certain things can tip you off to a student loan scam.
Here are some additional red flags to watch out for:
Unsolicited requests for your (or your child’s) FSA ID: Vera Tolmachoff, Restoration Manager at Allstate Identity Protection, says that an FSA ID should be guarded as personal and sensitive information. “Even the Department of Education (ED) loan forgiveness form does not require it. Any request for this information is a major signal that you’re being scammed,” says Tolmachoff. According to the ED, a student’s FSA ID — which is the username and password created to complete a FAFSA form — has the same legal status as a signature. That’s why you should never share your FSA ID with anyone, not even a family member or close friend, and especially not a stranger.
Urgent requests or threats: Imposter scams often rely on scare tactics that pressure you to “act now!” They might say something along the lines of: “Your eligibility for student loan forgiveness expires in 48 hours; call us back now to apply.” If you receive a communication like this, simply hang up or delete the message.
Calls or texts from the “Department of Education”: Similar to the International Revenue Service (IRS), the ED will never call or text you to initiate a conversation about loan forgiveness. There are federal loan servicers that work on behalf of the ED. These servicers are assigned to you once your loan amount has been disbursed to help manage the repayment process. However, if someone claiming to work with your loan servicer offers to expedite or guarantee loan forgiveness, end communication immediately.
Safety tips for current and prospective borrowers
Federal student loans have helped millions of people further their education. So if you have student loans — or are considering applying for some — our identity specialists are here to help you navigate them.
“A good rule of thumb to make sure you’re protecting yourself — especially when it comes to student loan scams — is to make sure you’re visiting the appropriate and official pages put out by government entities,” says Tolmachoff. “For example, applications for the government’s student loan debt relief program will be available only at studentaid.gov.”
That applies to other loan forgiveness programs as well, including debt relief options for teachers and government and non-profit employees.
If you have questions about student loan forgiveness, you should contact your loan servicer directly. If you’re having trouble remembering yours, Federal Student Aid (FSA) recommends that you visit your account dashboard and scroll down to the “My Loan Servicers” section, or call the FSA Information Center at 1-800-433-3243.
What to do if you're a victim of a student loan scam
If you think you've been scammed, FSA urges you to take action and consider these next steps:
Change your FSA ID and don’t share your new one with anyone
Contact your loan servicer to revoke any fraudulent power of attorney or third-party authorization agreement that may have been added to your file
Contact your bank if you have already paid a phony student loan debt relief company, and request that any future payments be stopped
Not sure if you’ve been scammed? If you’re an Allstate Identity Protection member, know we’re here to walk you through the issue you’re experiencing and advise on next steps.