New York Attorney General Letitia James issued a consumer alert on September 2, reminding student loan borrowers to beware of a new round of scams. Scammers impersonate government agencies or loan servicing organizations, claiming to be able to reduce debt or lower monthly payments in order to deceive people into paying fees and providing personal information.
These scams are related to recent changes in the federal student loan repayment system. In March of this year, the “Saving on a Valuable Education” (SAVE) program ended, and affected borrowers had to select alternative repayment plans.
Starting on July 1, the federal government introduced the Repayment Assistance Plan (RAP) and new tiered standard repayment plans; existing income-driven repayment plans will also be phased out gradually. The transition of systems and the different rules for various borrowers can be confusing, providing scammers with an opportunity to peddle so-called “debt reduction” services.
The Attorney General’s office stated that common tactics include making unsolicited calls, sending emails, or placing online advertisements, promising quick forgiveness of all loans; pressuring borrowers to make decisions within a short period of time; asking for upfront payments, signature of authorization forms, or providing Federal Student Aid (FSA) account information and passwords.
Letitia James cautioned that applying for federal student loan repayment plans does not require payment of registration fees, and no individual or private company can guarantee immediate debt relief. New York state law prohibits companies from charging fees before providing services. The Department of Education and loan servicers will not request borrowers’ FSA login passwords, and individuals should not disclose their Social Security numbers or other personal information to unknown sources.
Those in need of assistance can call 888-614-5004 to contact the Education Debt Consumer Assistance Program; if there are suspicions of encountering fraudsters, complaints can be made to the New York Attorney General’s office.