Thousands of student loan borrowers are set to receive over $4 million in refunds, according to a federal regulatory agency. The refund checks will be sent to borrowers who sought student loan forgiveness but were scammed by companies that falsely promised them relief.
The Federal Trade Commission, or FTC, announced the relief earlier this week. The agency claimed that the scammers “lured consumers with fake loan forgiveness claims and pocketed their money.” The Education Department has warned student loan borrowers to be wary of predatory companies seeking to capitalize on the complex landscape of student loan forgiveness and repayment.
Here’s what borrowers need to know.
Thousands Of Borrowers Impacted By Student Loan Forgiveness Scam Will Get Refunds
The refunds will be issued to borrowers who paid fees to so-called student debt relief companies that used names such as Mission Hills Federal, Federal Direct Group, National Secure Processing, and The Student Loan Group.
The FTC filed a complaint against several of these organizations in 2019, alleging that “they tricked students into paying hundreds to thousands of dollars in illegal upfront fees and pretended to lower consumers’ monthly student loan payments.” The perpetrators “tricked consumers into sending their monthly student loan payments directly to the defendants by falsely claiming to take over the servicing of the consumers’ loans,” said the FTC in a statement on Wednesday. “In reality, few payments were actually applied to consumers’ student loans and in many cases, none at all. Instead, the defendants kept consumers’ money for themselves.”
The FTC will be sending refund checks to more than 27,500 student loan borrowers. The refunds will total approximately $4.1 million.
“Recipients should cash their checks within 90 days, as indicated on the check,” instructs the FTC. “Consumers who have questions about their payment should contact the refund administrator, JND Legal Administration, at 1-844-566-0108, or visit the FTC website to view frequently asked questions about the refund process.”
Borrowers Warned To Be Wary Of Student Loan Forgiveness Scams
The Biden administration has been implementing multiple federal student loan forgiveness initiatives, largely by making changes and improvements to existing programs. Collectively, these efforts have led to at least 4 million borrowers receiving close to $140 billion in student loan forgiveness.
“I’ve reduced the burden of student debt for nearly 4 million Americans—including teachers, nurses, firefighters, and other public servants,” said President Biden on X, the platform formerly known as Twitter, on Friday. Biden is also pushing the Education Department to develop a new student loan forgiveness plan that could provide significant relief to even more borrowers, including those experiencing financial hardship.
But the complexity and ever-changing nature of these programs, coupled with widely-documented and ongoing student loans servicing issues, have often left borrower confused. This has created an environment ripe for scammers to take advantage of people.
The Education Department warns borrowers to be wary of unsolicited phone calls or emails from companies not affiliated with the department and which pressure borrowers to “act immediately” or apply for programs that are “first come, first served.” A notification that an account has been “flagged for forgiveness” is also suspicious.
“Scammers will frequently request an up-front or monthly fee while promising immediate and total student loan cancellation,” says department guidance. “Most government forgiveness programs require years of qualifying payments and/or employment in certain fields before forgiving loans.” Borrowers should also be wary of handing over sensitive personal identifying information, such as a Social Security number or date of birth, and they should never hand over their login credentials for their student loan accounts.
“The U.S. Department of Education and our partners will never ask for your StudentAid.gov username and password,” says the department.
How To Explore Student Loan Forgiveness While Avoiding Scams
The best source of student loan forgiveness information is through the Education Department’s website. The department has detailed published guidance on a variety of federal student loan forgiveness programs such as Public Service Loan Forgiveness, Income-Driven Repayment, and Borrower Defense to Repayment.
Borrowers can also contact their loan servicer for more information. If you’re not sure who your loan servicer is, you can log into your account at StudentAid.gov, which will provide the name and contact information for your current servicer.
“Some scammers may use official-looking names, seals, and logos, but that doesn’t make them trustworthy,” warns the department. “Know what official communications from us and our partners look like and always double check the sender’s email address.”
It’s okay to seek professional help while exploring student loan forgiveness and repayment programs, but borrowers should make sure they are dealing with a legitimate person or organization. “Getting assistance from a private, unaffiliated debt relief company doesn’t necessarily mean you’ll be scammed,” says the department. “But seeking out unverified services is a common path to a student loan forgiveness scam.”
Borrowers may want to work with individuals in a regulated and licensed profession. This would include attorneys, Certified Public Accountants, and certain kinds of certified financial advisors or financial planners. A licensed professional not only has trackable and verifiable credentials but also oversight (typically by a licensure board), public disciplinary records, and accountability to regulatory authorities.
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