Student Loan Forgiveness Scams: What to do
In our previous blogs, we covered how to identify if you’ve been scammed as well as preventative measures to take to avoid scams. Today our experts will guide you on how to handle student loan forgiveness scams.
Limit the Damage
- If there is an auto-payment setup, contact your bank/credit card to block future transactions, or close the account altogether so no more funds can be taken out.
- Contact your primary loan servicer (whether a Federal student loan lender or a Private lender) to notify them of your situation.
- If you signed over power of attorney with the scam company, take the steps necessary to get it revoked.
- “Until an attorney-in-fact’s powers are properly revoked, they can continue to legally act for the principal. To cancel a Power of Attorney, the principal can create a document called a Revocation of Power of Attorney or create a new Power of Attorney that indicates the previous Power of Attorney is revoked.”
Fight for your Rights
Any legal or formal complaint process (or request for assistance) will require as much proof of wrongdoing as possible. Compile all documentation, forms, emails, texts with the company/person in question. Here are some resources where you can file formal complaints with agencies that help consumers.
- Report Fraud with the Dept. of Education Office of the Inspector General
- Open a claim with the Consumer Financial Protection Bureau (CFPB)
- File a Fraud Report with the Federal Trade Commission (FTC)
- Under the “Credit/Debit” Category
- (If the issue is with your primary Federal Loan Servicer) Open up a claim with the Federal Student Loan Ombudsman
- General contact info
- Contact your State Attorney General. Most state attorney generals have taken an aggressive approach toward student loan repayment assistance scams.
- Contact the 3 major credit bureaus to potentially Lock/Freeze your credit and/or submit a “Credit Statement” to explain that you were scammed. This could potentially justify any derogatory marks on your credit report specific to your student loans.
Why is it important to take action quickly?
Do Not Delay
If you have been taken advantage of by one of these sham companies, the initial money may not be the only financial damage you face. There is a devastating ripple effect if loans are not paid as scheduled. Here are some examples:
- Your loans become delinquent (not paid in full by the scheduled due date). This could result in late/missed payment fees.
- Your loans could fall into Default. This is much worse than delinquency. A Collection Agency would attempt to collect your unpaid balance(s).
- Additional interest could be compounded and added to your principal balance. Even if you get them out of Default, the new balance with previously capitalized interest will start accruing new interest again once it’s back in good standing. This could mean thousands of dollars that you normally wouldn’t pay.
- Often times Collection Agencies have extremely high fees, and interest rates. Their goal is to collect as much money as humanly possible to settle the Default status. There is not a lot of room for negotiation.
- If you have any hearings regarding this debt, you may have to pay court fees or other legal fees.
- This could result in derogatory items in your Credit Report, and lower your credit score.
- You may be restricted from taking out any new student loans until the issue is resolved.
- You could lose out on potentially eligible previous payments made toward loan forgiveness. Your loans would become “new” and the previous repayment history wouldn’t be counted.
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