The Federal Trade Commission (FTC), 11 state Attorneys General (AGs) and the District of Columbia recently launched Operation “Game of Loans” to shut down scammers who were ripping off struggling student loan borrowers. As a result of the operation, the FTC and the AGs have filed actions against dozens of defendants who are accused of charging borrowers $95 million in illegal fees. The acting chairwoman of the FTC was not kidding when she said, “winter is coming” for debt-relief scams that prey on struggling borrowers.
Operation Game of Loans may not succeed in permanently shutting down student loan scams. Some student loan advocates have compared these scam operations to a game of “whack-a-mole.” Once student loan scams are shut down, more appear to take their place.
Fortunately, student loan scams are typically easy to recognize because they make similar promises to borrowers. Scammers could make claims that include:
- They are affiliated with the Department of Education. A1 DocPrep Inc., a defendant in one of the recent cases filed by the FTC, allegedly claimed it was affiliated with the Department of Education. This is a common claim that scammers use to make themselves sound legitimate.
- They can help you get loan forgiveness. Scammers may promise you that they can help you get loan forgiveness within a short period of time. You may see advertisements on your Facebook feed showing a photograph of your college with a headline claiming that you can receive immediate loan forgiveness. In reality, it is very difficult to receive forgiveness on federal student loans because specific criteria must be met. Loan forgiveness does not happen overnight.
- They can settle your student loan debt. Scammers may claim that they can settle your student loan debt for less than what you owe. This type of scam may link you to a fake law firm that demands an upfront payment before they settle your loans. There are reportedly many variations of this scam.
- They can get you the best interest rates and loan terms. Some scams may promise to improve your loan terms by reducing your monthly payments or interest rates. Of course, they require an up-front fee for these services.
Scammers always require upfront fees for their services. They may even ask you to make monthly student loan payments directly to their scam operations. While the FTC and state AGs are making progress in shutting these scams down, it is possible new scam companies will be created in the future. It is important to remain vigilant. Always question advertisements and claims that sound too good to be true.