If a stranger offers you student loan forgiveness, hang up
Student loan scammers have a brand-new hook: “Biden student loan forgiveness” or “stimulus forgiveness.”
Behind the pitch is the same old fraudster playbook, one that persuades federal student loan borrowers to pay for services they could get for free or to share personal account information in exchange for forgiveness.
The extended pause on federal student loan payments and revived talk in Congress of debt forgiveness make such deceptions easier to believe.
“Debt relief scams proliferate when there is a large amount of financial suffering or a lot of confusion, and we have both going on right now,” says Persis Yu, a staff attorney at the National Consumer Law Center and director of its Student Loan Borrower Assistance Project.
To be clear, there is no new broad-based loan forgiveness program available beyond the existing, often difficult-to-get options, such as Public Service Loan Forgiveness or Borrower Defense to Repayment.
There’s also no application or fee necessary to receive the federal student loan payment pause that’s been in effect since March 13, 2020, and will continue through Sept. 30, 2021.
About that ‘stimulus forgiveness’
It’s safe to dismiss any out-ofthe-blue offer to discharge debt, consolidate loans or alter your repayment plan as a scam.
“There isn’t a person or entity on the planet who can get you a better deal on your student loan or access a program that you can’t get yourself by working directly with your servicer,” says Betsy Mayotte, president and founder of the Institute of Student Loan Advisors.
Mayotte says she’s seen an uptick in complaints from borrowers about “Biden relief” and COVID-19 relief student loan scams.
In one instance, a borrower sent Mayotte the transcript of a fraudulent voicemail making an enticing offer: “It looks like your student loan has been flagged eligible for the recent stimulus forgiveness and relief legislation, however, your application needs to be completed.”
The caller sounded legit (she provided a name and an agent ID number) and expressed urgency to call back on a “dedicated eligibility line.” Then the caller further emphasized time sensitivity, saying the discharge would be first come, first served.
“What’s interesting is that this number came in as a D.C. number, which I’m sure just adds credibility to their scam,” Mayotte says.
Borrowers should continue to be on guard as student loan scams proliferate, largely due to the
“whack-a-mole” effect: As soon as one company is shut down, another pops up in its place, says Michelle Grajales, staff attorney with the Federal Trade Commission’s Bureau of Consumer Protection.
Red flags to watch for
The maxim “If it sounds too good to be true, it is” goes hand in hand with spotting scams.
But the most effective ones often mix fact and fiction, Grajales says. Tactics like using of-the-moment phrases or claiming to work for the federal government make false promises more appealing to financially vulnerable people.
“They’ve heard something about loan forgiveness,” Grajales says. “They’ve heard something about the CARES Act. Scammers try to sound legitimate by throwing in words that are very much in the public ear.”
The basic structure of student loan scams has remained the same for years, Yu says: Companies promise some kind of forgiveness in a short period of time, charge and pocket a large upfront fee, then get access to a borrower’s account to consolidate their debt and enroll them in an income-driven repayment plan.
“If they even do something (with the debt), that’s what they tend to do, or they just take the borrower’s money,” Yu says.
Experts say it’s critical to avoid handing over cash upfront or your
Federal Student Aid identification information, or FSA ID, which allows fraudsters to act on your behalf.
“What they’re doing is inserting themselves between you and your servicer,” says Scott Buchanan, executive director of the Student Loan Servicing Alliance.
“Oftentimes they’ll change your mailing address, email address so all the servicer communication will go to these scam artists. Then when they don’t do what they’re supposed to do, you won’t know until it’s too late.”
Use caution if a company expresses urgency to “apply now” or offers to provide a service you could do yourself, such as enrolling in income-driven repayment or applying for Public Service Loan Forgiveness.
When in doubt, contact your servicer directly using a phone number on its website — not a number given to you by a third party.
What to do if you’ve been scammed
If you were conned, remember that you’re not the first student loan borrower who’s been victim to predatory tactics.
“It has nothing to do with how smart you are; it has more to do with how good they are at their swindle and how vulnerable you are at the time that they reach you,” Mayotte says.
Regaining control of your account is the most important first step to take if it happens, experts say. Here’s how:
Sever all ties with the scammer. Contact your servicer to report the account breach. You may need to request a new FSA ID.
Check the contact information on your account and make sure all ongoing correspondence goes to you.
Contact your bank to stop any automatic payments to the scammer.
Freeze your credit.
Seek legal assistance for help recovering any money.
Report the scam to enforcement agencies.
How to complain about a scam
You can, and should, report any scam correspondence to multiple sources.
The more complaints these agencies receive, the more ammunition they’ll have to pursue legal action against fraudsters. Scams can be reported to and are tracked by:
Your federal student loan servicer.
The Federal Trade Commission. The Consumer Financial Protection Bureau.
Your state attorney general’s office.
The U.S. Department of Education’s FSA Feedback Center.
Residents of Nebraska earned a clean sweep of the honors in my 19th annual Derby of Economic Forecasting Talent (DEFT).
Contestants entered from Pennsylvania, Virginia, Iowa, Kentucky and even Poland. But none of them won. It must be something in the Nebraska water. Oh yes, Warren Buffett, widely considered the greatest U.S. investor, comes from Nebraska too.
Two people tied for first place. Les Digman is a retired professor of business strategy at University of Nebraska in Lincoln. Mark Riley writes for the virtual assistant “Ted” at the brokerage house TD Ameritrade.
Third place went to Jerry Jacobi, a physical therapist in Omaha.
You can play, too. The contest’s questions and entry rules are at the end of this column.
Giant monkey wrench
Predicting the economy was even more difficult than usual in 2020, as Covid-19 threw a giant monkey wrench into the machinery Even though the pandemic was already underway when this contest began in early March, most contestants underestimated its impact. Unemployment started 2020 very low at 3.5%, surged to 14.7% in April, and subsided to 6.7% at year-end. Most contestants didn’t see this coming, and that’s typical. When any variable veers way off from past trends, most people miss it.
Demand for gasoline and jet fuel fell dramatically. Most contestants rightly guessed that oil prices would fall, yet most of their estimates were still too high. Oil ended 2020 near $45 per barrel, down from $61 when the year began.
The average contestant forecast 1.1% economic growth, down from 2.1% in 2019. What actually happened was a lot worse. Growth was negative 2.3%.
The winners
Riley, 67 years old, tied for first with keen guesses about the price of oil and the unemployment rate.
“I think things are going to open up, because they have to,” Riley says now. “You can’t stay shut down forever.”
He sees signs that the economy is strong in Omaha, with employers such as Alphabet and Amazon. com hiring people, and new buildings sprouting up. He thinks the national economy will show a pretty good recovery in 2021 as well.
Digman tied for first by making good estimates on interest rates, oil prices and inflation. He likes to build forecasting models, even for athletic events, and insists that his models be multi-factorial. “People always look for the main factor,” he says, “but that might be only 15% to 20% of the result.”
In 2021, Digman looks for good growth off a low base.
“People are yearning for life as we used to know it,” he says.
Jacobi earned third place with his estimates on retail sales and oil prices. He thinks that “pent-up demand” will lead to a vigorous economic rebound this year, though “it will be June or July before it really takes off.” Inflation will follow, he figures, but won’t be serious until 2022 or 2023.
How to enter
If you’d like to enter the Derby, answer the six questions below, and provide some information about yourself – name, address, phone, and email. I need all this in case you win and I want to interview you.
You aren’t required to state the reasons behind your forecasts, but I like it if you do.
Send entries to me at jdorfman@dorfmanvalue.com, or John Dorfman, Dorfman Value Investments, 101 Federal Street, Suite 1900, Boston MA 02110. Entries must be postmarked or timestamped by midnight, March 10, 2021.
Now for the questions:
The U.S. economy shrank 2.3% in 2020. How much will the gross domestic product grow or shrink in 2021?
Inflation was pretty tame last year, at 1.56%. As measured by the Consumer Price Index, what will inflation be this year?
The interest rate on 10-year U.S. government notes shriveled to a mere 0.93% as of December 31, 2020. What will it be when 2021 ends?
You could buy a barrel of crude oil (West Texas Intermediate, or WTI) for $48.35 as the year 2020 ended. What will the oil price be when 2021 draws to a close?
U.S. retail sales grew a little bit in 2020 despite the pandemic. They were $539.67 billion in December. What will they be in December 2021?
Unemployment soared in 2020, and was still very high at 6.7% when the year ended. What will it be at the end of this year?
Entries are free, and I don’t make fun of the people who lose – at least, not by name. The winner will get a plaque. So give it a try, and good luck!