Looking for Ways to Get Rid of Student Debt? Here's how to Avoid Loan Forgiveness Scams

Looking for Ways to Get Rid of Student Debt? Here's how to Avoid Loan Forgiveness Scams
Cover Image Source: Student loan forgiveness scams drain victims of millions (representative image) | Unsplash | Christian Erfurt

Student loans are just one of the financial burdens that add to a debt pile for millions of Americans, with outstanding balances surpassing $1.7 trillion, as per CNBC Make It. Seeking relief from this financial strain, many individuals seek assistance, but that makes them vulnerable to a nefarious network of scammers lurking around to exploit desperate borrowers under the guise of offering genuine support. Recently, the Federal Trade Commission (FTC) announced a significant move to refund $4.1 million to over 27,000 victims ensnared by student loan forgiveness scams. This alarming revelation shows how important vigilance and awareness are while managing student debt.

Students arrive for their graduation ceremony at the Royal Festival Hall | Getty Images | Photo by Dan Kitwood
Students arrive for their graduation ceremony at the Royal Festival Hall | Getty Images | Photo by Dan Kitwood

 

The FTC's action stems from a 2019 complaint against the operators of Mission Hills Federal and Federal Direct Group. These entities were accused of deceiving student loan borrowers since 2014, employing tactics that involved extracting illegal upfront fees and falsely promising to reduce monthly payments. Moreover, they claimed to assume loan servicing responsibilities, siphoning off consumers' payments for their gain. The magnitude of this scam, affecting thousands of individuals, illuminates the extent of the issue and its detrimental impact on unsuspecting victims.

The urge to reduce debt or completely get rid of student loans makes borrowers fall for fraudulent schemes promising quick fixes, and scammers prey on this desperation by offering false hopes. This incident isn't an isolated one similar scams have surfaced in the past, prompting the FTC to take action and issue refunds. Last August, $9 million in refunds were disbursed to victims of Ameritech Financial, another organization operating a parallel student debt relief scam. Such recurrent occurrences highlight the persistent threat posed by scammers.

Federal Tax Refund with tax folder and stamped envelope | Getty Images | Photo by Eleanor Ivins
Federal Tax Refund with tax folder and stamped envelope | Getty Images | Photo by Eleanor Ivins

 

Recognizing the signs of a scam is crucial in safeguarding oneself against financial exploitation. Several red flags indicate potential fraudulent activity, including urgency in solicitation, extravagant promises, and requests for personal information. Legitimate assistance programs and federally-supported forgiveness initiatives exist to aid borrowers genuinely struggling with student debt. These avenues offer viable solutions without resorting to illicit means.

College students listen to a lecture at the University of California at San Diego campus. (Photo by David Butow/Corbis via Getty Images)
College students listen to a lecture at the University of California at San Diego campus | Photo by David Butow/Corbis via Getty Images

 

To shield oneself from student loan scams, it's important to exercise caution and employ preventive measures by watching out for the characteristics of fraudulent schemes, and understanding the legitimate channels for debt relief is paramount. Here are some actionable steps to mitigate the risk of encountering student loan scams.

Pay attention to warning signs such as urgent demands for action, extravagant promises of debt elimination, and requests for sensitive personal information, and steer clear.

Conduct thorough research into the legitimacy of companies or individuals offering assistance. Ensure that they are authorized and accredited entities operating within the confines of the law. Refrain from sharing sensitive personal data such as Social Security numbers or account passwords, with unknown or unverified entities.

While communicating with entities offering financial help, cross-check email addresses and URLs to verify their authenticity. Government agencies typically use official email domains and websites for correspondence.

Look for federally-backed debt relief programs and income-driven repayment options offered by legitimate institutions. These avenues provide genuine assistance without requiring upfront payments or compromising personal information.

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