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Student Loan Forgiveness Scams are on the Rise: Here’s how to protect yourself

Last year, Americans lost over $30 billion in phone scams alone. 

It’s a tragic trend that’s only been compounded by confusion surrounding the state of federal student loan forgiveness. In fact, prosecutors recently revealed that one scam center in California robbed nearly 20,000 people of over $6 million over the last three years. 

The pandemic has only made it worse.

As Kristen Evans, Section Chief at the Consumer Financial Protection Bureau said, “Scammers really prey on the financially vulnerable. With the pandemic, many people have been struggling financially and they are looking for financial relief…this just creates the perfect breeding ground for scammers to take advantage of people.”

If you read nothing else, here’s the long and short of it: if anyone calls or emails you offering to help you navigate student loans, charging an upfront or monthly fee, or promising immediate loan forgiveness, do not provide any of your personal information. These are scammers looking to make a quick buck, nothing more. 

While we’ll expand on the specific scams below, let’s review the recent developments in the student loan forgiveness saga so you have the facts on your side. 

The State of Student Loan Forgiveness

Since the pandemic began, student loan forgiveness has been a hot topic. 

In March 2020, President Trump paused federal loan payments altogether. Though the “freeze” is expected to end on January 31, 2022, calls for student loan forgiveness have grown louder in recent weeks. 

Senators Elizabeth Warren and Chuck Schumer have demanded $50,000 in loan forgiveness per borrower, though President Biden has largely ignored their requests.

Though he promised voters loan forgiveness during his campaign (to the tune of $10,000 per student), President Biden has since questioned his own constitutional authority to do so and deferred the matter to the Department of Education (DOE). 

Their official ruling on the matter has yet to be delivered. 

In the meantime, President Biden has authorized student loan forgiveness for a segment of the population, namely borrowers with a total and permanent disability

All in all, the current administration has canceled over $11 billion in student loan debt

Though that may sound promising, that’s merely a drop in the bucket of the total $1.7 trillion in debt held by over 45 million graduates. 

As time goes by, it seems increasingly unlikely that sweeping student loan forgiveness will ever go into effect. 

That’s why any calls, texts, emails, and advertisements related to loan forgiveness must be met with suspicion. This is true even if the company or caller in question knows your total balance of student loans

Unfortunately, scammers can easily obtain credit reports and use that information to fake legitimacy. But even if they know exactly what you owe, never provide any personal information (federal student aid ID, Social Security number, or banking information). 

Instead, request specific information from the caller (such as the company name) and run a Google search. Or, if you received a suspicious email, check the email address and make sure it ends in “.gov.”

Anything less is likely a scam. 

While there are many ways fraudsters can target unsuspecting individuals, these the are five most common scams reported over the last year:  

Scam 1: “Biden Student Loan Forgiveness

If you’re ever contacted regarding the “Biden student loan forgiveness program” or “the CARES program,” you can have confidence that it’s a scam.

Why? There are two reasons: 

  • Because the so-called “Biden student loan forgiveness program” simply doesn’t exist. 
  • Even if the “Biden student loan forgiveness program” were real, no outside agency could do anything to help with it.

While it’s true that the Public Service Loan Forgiveness (PSLF) program does exist (and was founded in 2007), the Department of Education is the only entity that can actually provide relief from your federal student loans.  

We’ll say it again: only the Department of Education can forgive your federal student loans. 

No other company can do that for you. Period. 

2.  Scam 2: “Pay a small fee for loan forgiveness!

This is a contradiction in terms, plain and simple. 

If a borrower truly qualifies for PSLF (which you can verify here), they won’t need to pay a single dollar. After all, they’re getting their debt slate wiped clean.

Therefore, if a company calls or emails you asking for an upfront fee in exchange for loan cancellation help, it’s a scam. 

3.  Scam 3: “We’re calling on behalf of the Department of Education…

Hang up the phone if the caller claims to be working “alongside” or “in conjunction with” the DOE. 


Because the Education Department cancels loans in-house. They don’t partner with outside agencies or outsource their work to third parties.

If your loans truly are getting canceled, you’ll hear from the DOE directly. 

4.  Scam 4: “We’ll help you negotiate your student loans!

This isn’t a car dealership. 

Student loans can’t be negotiated; they can only be paid, canceled, or ignored. 

Don’t work with anyone who offers to help you “negotiate” your outstanding balance. In reality, they’re negotiating with you to see how much money you’re willing to part with. 

5.  Scam 5: “Act now! Student loan forgiveness is expiring!

PSLF has been in effect for years, and it will remain an option for qualifying borrowers long after the loan pause expires on January 31, 2022. 

If anyone pressures you to “act fast because PSLF is expiring,” know that you’re dealing with a scammer. 

This was a top tactic used by the California scammer network, which would routinely put pressure on questioning borrowers by claiming that “their offers applied for a limited time and that there wasn’t another way to obtain student loan forgiveness.”

Don’t let anyone rush you. True loan forgiveness, loan consolidation, and income-driven repayment plans have no expiration date. 

Moving Forward

In the digital age, most calls from unknown numbers and strange emails are best left ignored. That’s especially true during a year filled with confusion surrounding PSLF, both on Capitol Hill and in the general public. 

On the other hand, if you were tricked by a loan forgiveness scam, be sure to take the following precautions:

  • Contact your bank and credit card company to close accounts and issue stop payments
  • Contact your student loan servicer so they can monitor your account
  • Contact the Consumer Financial Protection Bureau (CFPB) 

Finally, you can also contact the Federal Trade Commission (FTC) to file a complaint on the scammer or company in question. 

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