Several days ago scammers posted to Instagram promising student loan debt relief to the first 20,000 responders. The fake accounts purported to be from Sallie Mae and the posts said that due to the government shutdown, people could get rid of their student loan debt. Sallie Mae denies owning the accounts, and sets the record straight on its own Twitter feed and Facebook page.
Scammers Love to Target Those in Tough Financial Straits
This is just another example of the thousands of scams targeting people who are struggling with debt, whether it be student loans, credit card bills, mortgages, or car loans. If a new financial crisis pops up that affects lots of people, scammers pounce. We saw this with the foreclosure crisis. When the numbers of people facing foreclosure dramatically increased, all sorts of new “help” did too – like foreclosure rescue consultants who took people’s money with the promise of saving homes, but then disappeared.
Why Student Loan Borrowers?
The number of people struggling to pay student loans has skyrocketed in recent years. In fact, the total amount of national student loan has now overtaken that of credit card debt.
Bankruptcy isn’t much help to most people (it’s tough, although not impossible, to discharge student loans in bankruptcy). And the Department of Education and its collectors are able to use collection methods unavailable to most other types of creditors. For example, the Department of Ed can garnish your wages or take your tax return without first suing you and getting a judgment (most other creditors must sue you in court and get a money judgment before using such collection methods).
This means that most student loan borrowers feel particularly desperate when they can’t make payments or are in default. And that’s where the scammers come in. According to Los Angeles bankruptcy attorney Leon Bayer, there is a proliferation of radio and Internet advertisements for “student loan negotiation.” These, say Bayer, are the newest incarnation of schemes to take advantage of people when they are feeling desperate. (You can hear more from Leon on this and other subjects in his recent radio interview on KALW.org.)
The National Consumer Law Center recently issued a report on the increase in student loan “debt relief services.” The report found that these “businesses” engaged in a wide range of deceptive practices and outright fraud. (See New Report Documents Abuses by Businesses “Helping” Those With Student Loan Debt.
Don’t Be Taken In
Whatever you do, says Bayer, don’t provide personal information in response to these ads that claim to provide help. That’s what they’re looking for – enough information so that they can steal your identity. No doubt, that was the aim of the Instagram scam.
You can avoid many types of scams by keeping in mind the old saying “if it looks too good to be true, it is.” Canceling all of your student loan debt just by responding to an Instagram post? Yep – waaaay too good to be true.
Legitimate Ways to Reduce Your Student Loan Payments
If you have federal student loans (meaning they were made by the federal government or guaranteed by the federal government) you may be able to take advantage of one of the Department of Education’s flexible repayment plans. Under these plans, your payment could be as little as $0 if your income is very low. (Learn how to find out what type of student loan you have and the student loan repayment plans available to you.)
If your loans are private, then your options are much more limited. Your loans are not eligible for the federal repayment plans. You might be able to negotiate something with the lender, although don’t expect miracles. If you want to try this, however, do it yourself or talk to a lawyer. And if you are having a problem with a private student loan lender (for example, it won’t return your telephone calls), file a complaint with the Consumer Finance Protection Bureau. (See my previous blog post, Problem With a Private Student Loan? Tell the CFPB for more information about the CFPB ombudsman.)