How to Avoid Student Loan Forgiveness Scams

The Biden-Harris Administration has announced a one-time plan to forgive up to $20,000 in student loans for those who qualify.

It’s big news. It involves money. And that makes it very, very likely that scammers will use this to take advantage of people. Read on to learn how to spot potential scams and keep yourself safe.

Are there any known student loan forgiveness scams?

Whenever something big is in the news, and for every major seasonal event, scammers try to take advantage of the situation. Examples include:

Natural disasters and other tragedies
COVID-19
The 2022 Russian invasion of Ukraine
The death of Queen Elizabeth II
Valentine’s Day
Tax season
Black Friday shopping time
The holiday gift-giving season

We haven’t heard of specific student loan forgiveness scams yet, but it’s almost certain that bad guys will attempt to use the federal student loan forgiveness program to defraud people.

How do these scams work?

Typically, scammers are after one of three things: money, data, or access. Thus their attacks tend to come in the form of:

Phishing emails that direct recipients to malicious websites that steal personal information and/or account credentials.
Phishing emails containing malicious file attachments or links to get the recipient to click on, download, or install malware
Scam phone calls that attempt to obtain personal information or get money from the victim
Scam text messages that contain malicious links or bogus callback numbers as a first step in perpetrating the types of attacks listed above

In a student loan forgiveness scam, scammers will mostly likely impersonate a trusted authority or someone offering help with loan forgiveness. This might include:

A representative of the local, state, or federal government
An employee of your student loan servicer or a bank, loan consolidation firm, or other financial institution
A government agency or non-profit organization that helps people claim student loan forgiveness funds
An employee of your college, university, or other educational institution
A law enforcement officer
An IRS or state tax authority agent
A representative of a major tech company like Apple, Microsoft, or Google

How to spot a student loan forgiveness scam

Scams are diverse. But they have common features. Here are telltale signs of a scam to watch out for:

They contact you first
If someone contacts you out of the blue about student loan forgiveness, be extremely wary. It’s a good indication of a scam.
Their email contains typos, grammatical errors, or informal language
Banks, universities, and the federal government aren’t perfect. But they don’t send out emails with multiple grammatical errors or that begin “Hello my dear.”
They ask for highly sensitive information
No one should ever ask you for your password, bank details, or other sensitive personal information over the phone, via email, or by any other insecure means. If someone does this, assume that they are a scammer.
They ask for money (especially in weird ways)
A common scam tactic is to ask for money up front, usually with the excuse that it’s necessary in order to “process a refund” or “release funds.” But this just isn’t how legit organizations work. It’s a double red flag if they ask for the money in some non-standard, untraceable format such as gift cards or cryptocurrency. You can’t pay the federal government in Starbucks or Monero!
They rush you to take action
Scammers play on people’s fears — especially their fears of missing out or losing money. Thus they often use an exaggerated sense of urgency in their calls or emails. Examples might include things like:
“Act now or you will lose your right to claim $20,000 in loan forgiveness!”
“There was a problem with your account and we were unable to process your student loan forgiveness application. Verify your FSA ID details in the next 24 hours to avoid cancellation.”
“Urgent! Someone has applied for student loan forgiveness in your name. If this was not you, log in to your account immediately at this link in order to report fraudulent activity.”
If you receive one of these “the sky is falling” messages, take a deep breath and remember that scammers want you to act without thinking.
They use scare tactics
Scammers may try to bully or frighten people into doing what they want. They frequently use the threat of arrest or legal action, posing as law enforcement or the IRS.
If you get a call telling you that you’re “under investigation” for fraudulently applying for student loan forgiveness or an email warning you that you’re “going to be audited” because you didn’t report your student loan relief as income, don’t be intimidated, and don’t engage. And no, you can’t pay the police with Target gift cards!