We are in the midst of the college graduation season and along with their diplomas, many graduates will also be taking with them substantial student loans. I have written often about phony student loan debt relief companies and with good reason. More than thirty-eight million Americans have student loans with an outstanding balance of more than 1.4 trillion dollars so it is no surprise that scammers are focusing their attention on these students and former students through scams that falsely promise to provide debt relief. Now, after a five year pause during the pandemic on penalizing student loan borrowers for not making payments, in January of 2025, the Department of Education instructed loan servicers to start reporting late payers to credit bureaus which is resulting in millions of student loan borrowers having their important credit scores drop dramatically. Government figures indicate that two thirds of student loan borrowers are late or behind in their payments and this presents a dire situation to which scammers can be expected to respond by offering phony debt relief to desperate borrowers.
Scammers like Arete Financial Group who charged illegal upfront fees for their services can be expected to flourish in this new environment. Arete would change their clients’ Federal Student Aid (FSA) login ID, password and contact information with their clients’ loan servicer which effectively eliminated contact between the borrowers and their loan servicers. This enabled Arete, according to the FTC, to place the borrower’s loans into temporary forbearance or deferment status without the borrower even being aware of this. Thus when the borrowers sent their payments to Arete that they were told would be credited toward their loans, the money actually was kept by Arete. Some of Arete’s clients saw their loans become delinquent and their income tax refunds garnished to pay for overdue loan payments. The victims of the scam also lost the money they paid to Arete that was intended to be applied toward their loans. Ultimately, Arete settled a lawsuit brought against it by the FTC and funds obtained from Arete through the settlement of the lawsuit was returned to victims of the scam.
TIPS
The old adage still is true. If it sounds too good to be true, it probably isn’t true. Many of these student loan debt relief scammers promise quick loan forgiveness, which is unrealistic. In addition, you should never pay any upfront fees for student loan debt relief assistance. Those fees are illegal and are a sure indication that you are being scammed. Also, remember my motto, “trust me, you can’t trust anyone.” Don’t trust scammers merely because they use names that sound like they are affiliated with the government. You also should never share your FSA ID with anyone.
For information you can trust about federal student loan repayment option, go to https://studentaid.gov/articles/student-loan-forgiveness/ . There you can learn about loan deferments, forbearance, repayment and loan forgiveness programs and there is never an application fee. If you owe private student loans, contact your loan servicer directly. You can also look into student loan refinancing rather than consolidating the loans. Refinancing student loans can result in a lower interest rate. Also, this site is helpful https://www.ed.gov/about/news/press-release/us-department-of-education-opens-revised-income-driven-repayment-plan-and-loan-consolidation-applications-borrowers
Here is a link to an FTC video that explains student loan scams and what you can do to protect yourself. https://www.youtube.com/watch?v=7TjSI4Q6ztQ
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