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How to spot a student loan scam

MICHEL MARTIN, HOST:

Millions of Americans with student loan debt got welcome news from the Biden administration last week, a plan to cancel up to $10,000 or even $20,000 worth of federal student loan debt for individuals who qualify. It's an announcement that many borrowers have been waiting to hear, but they're not the only ones who've been waiting and hoping. We're talking about scam artists who are always ready to pounce when they smell money. And they don't care how they get it, whether it's from seniors with home improvement needs, veterans with injuries or college kids burdened by loans. And they're always ready with spam calls, texts, social media advertisements and fake websites designed to seize the moment and all the personal data and money that goes with it. So be ready for them.

We thought it would be helpful to hear about the scams that are out there and how to avoid them. So we called Anna Helhoski, senior writer at NerdWallet, where she specializes in student loans, and she's with us now. Anna, thanks so much for joining us. This is really important.

ANNA HELHOSKI: It absolutely is. So thanks for having me, Michel.

MARTIN: Do you have a sense that people have already been victimized with these scams even though the program isn't even rolled out yet?

HELHOSKI: It's absolutely possible. As soon as the announcement was made, the scams were out there. The phone calls were being made. I actually got a voicemail about two days after. I paid off my student loans a while ago, and so it was pretty clear that this wasn't legit. But the problem is a lot of people who maybe aren't necessarily on top of all the news and information and all the murkiness that's involved with it will say, oh, I guess I need to call now.

MARTIN: You yourself got one of these scam calls? That's crazy.

HELHOSKI: I did.

MARTIN: What did it say, if you don't mind my asking?

HELHOSKI: It was one of those robot dialers. So it was like, hello, I'm calling in regard to your student loan. Our records show you qualify for loan forgiveness. Time's running out, and it's imperative that you call us back.

This is pretty much the formula that they use.

MARTIN: Well, tell us, what are some of the other formulas that they use? And what are some of the red flags that people should be aware of?

HELHOSKI: So borrowers should be skeptical any time anyone is contacting them about student loan forgiveness or any kind of debt relief. As I already mentioned, robot dialers is kind of the easiest one. But the other ones will come through a human. So it'll be a regular person calling you. And they'll be asking for you to pay upfront or monthly fees in order to get help. And there's really nothing a debt relief company can do that you can't do on your own. This isn't like tax preparation. This, when it comes, will be a simple form. You can do it yourself. You don't need to ever pay somebody else to do it.

Just generally, if you're ever in doubt about any kind of communication that you're receiving, don't respond. If it's an email, don't respond to it. If it's a phone call, hang up. Call your student loan servicer directly using the information that's provided on your servicers' website. You can ask them, hey, did you reach out to me? Did this happen? The most likely say, no, we didn't - because servicers are only going to call you if you've missed a payment. They generally are not reaching out to you. Now, it's possible that that could change in the coming months because of the loan forgiveness.

Student loan servicers are scrambling to train up their staff, and they're waiting for more guidance from the Education Department. So it's really no wonder that borrowers can fall easily prey to scammers, especially when there's pressure. There's an imperative that's being expressed to act quickly or you'll miss your shot. And nobody wants to miss out.

MARTIN: So you're saying that's just not true. Anybody who says the window is closing, you've got to act quickly - on its face, that's a scam.

HELHOSKI: Exactly. Borrowers need to operate on the Education Department's schedule. That's really frustrating, I know. The application will be available in early October. And yes, you do want to get it in as soon as possible. But the Education Department will still be collecting and processing applications long after. So it will take about 4 to 6 weeks on estimate to get cancelation after you submit an application. But there's no jumping in line. There's no way to do that sooner.

MARTIN: Before we let you go, is there something that people can do if they're listening to our conversation and thinking, oh, no, I answered one of these texts or emails or calls. I gave these people my personal information. Is there anything that people can do?

HELHOSKI: There is. So there's a lot of shame that gets involved with getting scammed. But if it happens, you do need to act quickly. If you've handed over any kind of personal information, even your federal student aid ID, let alone your Social Security number or your bank account information, you need to start taking steps to to mitigate what might happen. So first off, contacting your federal student loan servicer to revoke any kind of third-party authorization that you may have given, contacting your bank or credit card company to request the payments be stopped, reporting the theft. Go to identitytheft.gov to do that. And they can also give you some guidance on a recovery plan.

And finally, filing complaints. Agencies rely on consumer complaints to police any kind of harmful student loan scams. So it's important to report them. Do it with the Federal Trade Commission at reportfraud.ftc.gov, the Consumer Financial Protection Bureau at consumerfinance.gov and with your state attorneys general.

MARTIN: So lose the shame but get on it.

HELHOSKI: Exactly.

MARTIN: OK. That was Anna Helhoski, senior writer for NerdWallet, talking about student loan scams and how to avoid them. Anna, thanks so much for talking with us about this.

HELHOSKI: Thanks, Michel. Transcript provided by NPR, Copyright NPR.