The Biden administration is increasing its efforts to fight scams aimed at taking advantage of borrowers applying for its expansive student loan forgiveness plan, senior administration officials announced Wednesday.
The administration's forgiveness program will cancel up to $20,000 in student loan debt for borrowers making less than $125,000 or $250,000 for households. The plan, which is projected to cost $400 billion, could benefit as many as 40 million Americans.
Since the relief was announced in August, the administration has released very little concrete information about what the application will look like or when it will be released. That vacuum has created an opportunity for scammers: As NPR reported last month, some borrowers have already encountered student loan relief scams and misinformation in text messages, phone calls and emails, and experts say it's getting worse.
"This Biden forgiveness thing is Christmas, Thanksgiving and the Fourth of July all rolled into one for the scammers," says Betsy Mayotte, the president of the Institute of Student Loan Advisors, a nonprofit that offers free counseling to borrowers.
"The release they did today is a great step," Mayotte added. "There's only two things we can do as a community [to prevent fraud]. One is to educate borrowers and the other is enforcement."
The administration is aiming to do both.
In order to hold scammers accountable, the administration plans to increase collaboration between the Department of Education and other federal agencies, including the Federal Trade Commission and the Consumer Financial Protection Bureau. The administration will also share scam complaints with states more frequently, so state attorneys general can act faster to stop scams in their own jurisdictions, and plans to partner with social media influencers on a public awareness campaign.
"It's an all-government approach, because what we know is it's already happening, that there are evil people who will be trying to use a program like this, that's trying to help people, and run their own frauds and scams to somehow get money or personal information about people," says Richard Cordray, the chief operating officer of Federal Student Aid, a branch of the Education Department.
"What we're trying to do here is to get as much relief as possible to the hard working former students who deserve this relief," Cordray added. "We're moving at warp speed to get the application and the process going here."
Student loan forgiveness was ripe for fraud well before the Biden administration's sweeping plans to cancel debt. According to a July report from the Tech Transparency Project, more than 10% of Google ads that popped up in searches related to student loan forgiveness were fraudulent. And in the last year and a half, the FTC has reached nearly $30 million in settlements for borrowers who were falsely promised relief on their student loan payments.
The administration's efforts to stop these types of scams fall heavily on the shoulders of borrowers themselves: Much of the announced plans focus on increasing efforts to educate the public on how to catch and report scams on their own.
"You are your own best protection against scammers," says Cordray, who was also formerly the director of the CFPB.
The White House also released a "Do's and Don'ts" tip sheet. Among the tips included:
- Don't pay anyone who promises loan forgiveness. The application will be free.
- Don't give anyone personal account information for the Federal Student Aid website. The Education Department and federal student loan servicers will not call or email asking for that information.
- Don't give personal or financial information over the phone to a caller that's unfamiliar. When in doubt, borrowers should hang up and call their loan servicer directly.
The administration urged borrowers to sign up to be notified when the application is available, to make sure their loan servicers have their current contact information and to report any scams they encounter to the FTC.
One way to avoid scam vulnerability in the first place would be to release more specific information on what the forgiveness application will look like or when to expect it.
"One of the most critical ways to prevent scams and protect borrowers from being taken advantage of is developing a clear, simple, and secure site for borrowers to apply for debt relief and have the most up to date information from trusted sources," the administration wrote in a fact sheet outlining their efforts to combat scams.
But in a briefing Wednesday, senior administration officials would not provide any more concrete details on when the application will go live or what the process will look like.
Mayotte says releasing the application might not actually be all that helpful in preventing bad actors.
"In one way, it'll help," she says. "But if I know the scammers, they'll use that as an opportunity too: 'The application's out. You have to hurry. Time is short. Now that the applications are out, let us help you to make sure you don't miss it.' So it's a catch-22."