Headline-scanning internet scrollers might stop in their tracks and never get around to reading the last two – and arguably most important – words in this article’s title. Relief scams are a huge problem today and they’ve been profitable for fraudsters for a long time.
On Tuesday, the U.S. Senate unanimously passed Senator Tammy Baldwin’s bipartisan Stop Student Debt Relief Scams Act, which will enhance efforts to identify and shut down student debt relief scams.
Fraud now federal crime
Now, will this stop all scams from continuing? No, but it’s now a federal crime to access U.S. Department of Education information technology systems for fraud, commercial advantage, or private financial gain. That crime can be punished with fines up to $20,000, up to five years imprisonment, or both.
The Stop Student Debt Relief Scams Act directs the U.S. Department of Education to create a new form of third-party access, similar to the current “preparer” function of the Free Application for Student Aid (FAFSA) for those applying on behalf of a student and their family, in order to protect legitimate organizations – such as legal aid groups – that help borrowers navigate repayment. The act will also require student loan exit counseling to warn federal borrowers about debt relief scams.
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This is great news, but borrowers still should be aware that there are already ways to help lower or postpone payments, all of which are available for free. Income-driven repayment, deferment, forbearance, consolidation, rehabilitation and even some programs for loan forgiveness are available without fees or hidden charges. When borrowers get scammed, not only are they defrauded of money out of their pockets, but when they’re made to believe payments are due, they can become delinquent and eventually default on their loans, plunging them further into debt.
Baldwin working across the aisle
“Far too many students are already struggling with student loan debt, and they deserve to be protected from scammers and bad actors who are preying on their financial security,” says Senator Baldwin. “The additional repayment relief provided to many borrowers during the COVID-19 pandemic has unfortunately also created additional opportunities for fraudsters to do more harm.”
Americans are facing more than $1.7 trillion in student loan debt. It’s not too long ago the National Debt was still in the single-digit trillions, but that’s another story. That’s a huge number and all signs point to it continuing to grow. According to a 10-year study by U.S. News, the 2019 class of college graduates, who took out loans (which is 65% of students studied), from ranked colleges averaged $30,062 in student loan debt. The average at the beginning of the study was $23,765 in student loan debt from the 68% of graduates who took out loans.
This is one small step for current borrowers, but one giant leap in identifying student loan debt as a crisis in this nation.
