Watch Out For Student Loan Scams - with Laura Helmich

Today we are once again joined by Laura Helmich, Business Development Officer, and our resident Student Loan specialist to discuss student loan scams that are prevalent. What are red flags to watch for and how can you protect yourself? Listen to learn more!

Transcript

Announcer: Welcome to the "What Matters Most" podcast, presented by First United Bank & Trust. That's my bank. Visit us today at mybank.com.

Eric: Hello, and welcome to "What Matters Most," a podcast all about finances, community, savings, and security, for you, your family, and your business. This podcast is brought to you by the helpful folks at My Bank, First United Bank & Trust. I'm your host, Eric Nutter, and in today's episode, "What Matters Most" is student loan scams. And for this discussion, I'm thankful to be joined once again today by Laura Helmich, business development officer, and our resident student loan specialist at First United. Hey, Laura, how's it going today?

Laura: Doing good. How are you doing today, Eric?

Eric: I'm doing very well. And I appreciate you joining me for a second episode in a row to talk about student loans. Unfortunately, this time we're talking about something pretty serious. Student loans themselves are serious, but then what happens on the dark side of student loans, the scams that are out there?

Laura: Oh yes, and I appreciate you letting me speak upon this because this has become a very big problem. And a lot of the reason that I kind of reached out to you, right, and asked you, "Hey, I'd love to be able to do something in regards to the student loan scams," because they are becoming very prevalent right now. And I just had...

Eric: Yeah. You just had something recently, right?

Laura: Yes, I did. I had a customer just last week go through one of the scams that we're about to talk about. And he had went through, had done all the paperwork and that, and as soon as he hung up the phone, he had a sick feeling in his stomach, like, "I don't think I should have done this." He did contact one of our offices, and the office got him in contact with me immediately. And I worked with him, and thank goodness, he had the hindsight to call as quickly as he did, because I think that we were able to help him resolve that issue in regards to that.

Eric: That's good. That's good.

Laura: Yes.

Eric: So, what kind of scams are there out there? I mean, is it just that they're presenting to them, "Here's a low-cost loan option," and then they start sending money to random person?

Laura: Well, what is happening is right now, especially with students getting ready to graduate college, and also with the emphasis on student loan debt that we hear all the time, there are a lot of marketers out there that are contacting students. They get mailing lists, right? They get lists from either credit bureaus or things like that that will detect if somebody is a recent college graduate, if they have had past due payments on their student loans, or even defaulted on student loans. And then they also look at students or borrowers that have a high amount of student loan debt. So, what these companies are doing is that they're engaging borrowers with promises of like, "Hey, I'm going to be able to reduce your loan payments," or, "I'm going to be able to reduce your interest rate." One of the biggest things that these companies are promoting to customers is that "I can help you get your loan forgiven." So, of course, what's going to happen if you're a student that recently graduated or have been having problems paying your $30,000 or $40,000 worth of student loan debt, what makes you excited? Right? Forgiving.

Eric: Right. Less payments or no payments.

Laura: Yeah. "Let me just forgive this." So, they are very good at playing on your pain points on that. So, you know, that's going to be what they're going to roll out with you when they're first talking to you. And the thing that is usually getting people excited is the loan forgiveness. So, yeah.

Eric: So, are there red flags that people can kind of watch for to know, you know, when am I being scammed?

Laura: Oh, definitely. Right. Right. And probably the biggest red flag is going to be that they are going to be offering you the service for a fee. So, they are going to go over with you and ask you how much student loan debt you have and things like that. And then they're going to go in and say, you know what? I can either get your loans consolidated and get you into a either smaller payment or an income-based repayment, and also work on getting your loans forgiven, for a fee. That fee can range anywhere from $200 to $1,000. And that should always be the red flag for anybody, because within the student loan industry, right, we have both the federal loan program, that is run by the federal government, and we also have, students sometimes take out private loans.

I can guarantee you that by contacting either, you know, your loan servicer for your federal loans, or your loan servicer for your private loans, you can do these things for free, okay? Going through and going through a federal loan consolidation through the federal government does not cost you any money to do. So, it is a free service. So, right when they start asking for money, that has to be your biggest red flag. From my experience of just last week, what my customer was paying for was a one-time upfront fee of $500 to this company. And then he had also agreed to make $60 payments every month for 36 months to this company for their service.

Eric: Now, was it a legitimate...I'm like, is it a service? I know it's a scam, but were they actually doing what they said they were going to do?

Laura: When you start looking at the fine print within the contracts that you are signing, all that this company was doing was going to be providing a document service. What that basically means is that they were going to fill out documents for the customer.

Eric: To try and do the thing that you could do for free yourself.

Laura: Correct. To do the thing that you can do for free on that. And, you know, and it says it within that contract if you really look at the fine print. A lot of the other companies will also tell you that they are a credit repair company. So, for a lot of students that may be having their pain point of having a defaulted or past due student loan, that is making them excited that they can repair their credit. But it's not that easy to repair credit. And if you did want to go and repair credit, there are a lot of agencies out there that offer free credit counseling to be able to do that. So, yeah, like I said, that is probably the first red flag is that if they are asking you for a fee, and they are asking you for a credit card number or anything, that's red flag number one.

Eric: Gotcha. All right.

Laura: Okay? Now, if they are saying that they are going to be able to reduce your monthly payments based upon your income, they are also going through a federal loan benefit of the income-based repayment, right? And that, again, just like with student loan consolidation, or anything through the federal loan programs, is something that you are able to do yourself with your loan servicer, if you are wanting to possibly look at getting your payments done. Because you have to supply information to your loan servicer, they're going to be asking you probably for your prior year's tax returns. And that is what they use to calculate what your income-based repayment is going to be. Again, it's never at any cost, okay?

And then the last thing, and that was one of the first things that we mentioned, was the immediate loan forgiveness. And this is the thing that really burns me up when these scammers are saying that there is an immediate loan forgiveness. I've been doing education loans now for about 30 years, and I also have children that have taken out federal loans in the past. There is no such thing as an immediate loan forgiveness. Right now, especially through the federal government, really, the fastest that you can get a loan forgiveness through your federal loans is going to be by what is called the Public Service Loan Forgiveness Program.

Now, what that is is that that does require the borrower, the student borrower, to work in a public service job for 10 years. So, they have to be working for a, you know, a non-profit, and they have to show proof of that every year to show that they've been doing that for 10 years. Once they do that, if there is a balance, because during that 10 years, there's still gonna be some type of payments being made on that loan, but after 10 years of performing public service, or working in a career in public service, the federal government does forgive your loan. So, it is a great program, but again, that's the fastest way, is going to be 10 years. After that...

Eric: It's not quite immediate.

Laura: And it's not immediate. And I can say that because my daughter does work within, you know, the mental healthcare. So, she does work within public service. So, if there's anybody that wants to know about Public Service Loan Forgiveness, and understands it, I would say that, you know, I'm probably one of the last of the Mohicans over here that understands the Public Service Loan Forgiveness, because, you know, my daughter's attached to it. You know, after that 10-year Public Service Loan Forgiveness, right now, the way things are within the federal government, the next forgiveness piece happens after 20 years. So, if you do not qualify for the Public Service Loan Forgiveness in 10 years, the only other way you can qualify for forgiveness is going to be if you have made payments on your loans for 20 years, and if you're doing some type of income-based repayment, after 20 years, if you still have a balance, the federal government will, you know, forgive any of that balance. But yeah, there is no such thing as immediate loan forgiveness.

Eric: So, in those scams, they're basically, they're saying they'll forgive it, tell you to stop making those payments, and then you pay them instead?

Laura: Well, what they kind of do within those contracts is is that they have at the very last thing is, "And please note that we are just submitting the documents for you. You are still going to need to work with your loan servicer for your student loan payments." They are just going to submit the paperwork for you. Whether that, you know, the entity that is currently holding your loans is going to accept that paperwork, you know, is up in the air. You know, more than likely, a loan servicer is going to question that. The forms. Because they're not really federal forms. That I see.

Eric: Gotcha. Any other red flags or anything that they should look out for?

Laura: They're going to pressure you. Once they get you on the phone, and you're an active participant in speaking with them, they are going to want you to give them credit card information, and to sign, immediately. You know, they don't want you...

Eric: To go talk to somebody.

Laura: ...to do what a financial advisor would tell you. I would tell you if somebody's presenting this to me, I would say, "Thank you for the information. Would you mind sending me the contract, and possibly an email outlining everything you've told me?" Because you need to process that. You need to look at it. If you're not 100% sure on that, then go to a financial advisor. I mean, the customer I worked with just recently, as soon as he hung up the phone, he knew that he didn't have a good feeling about it. And, you know, and then he bounced it off somebody. You know, if they're a legitimate company, they would be happy to provide you with, you know, the documents that you would be required to sign, and also memorialize, right, the conversation, so that you have an email or something that you're going to be able to tie back to. But they're not going to want to do that. If they don't want to do that, then you don't want to do business with them.

Eric: Yeah. I used to have a supervisor that would say if someone call... So, this advice goes for a lot of things, because they used to say "If someone called and if they need an answer today, the answer's no."

Laura: Right. Exactly. Exactly. It's just like, you know, when you're looking at student loans and student loan debt, you know, it's right up there with mortgages and everything else, as far as the amount of student loan debt that is out there. You have to start looking at that as you would when you're looking at buying a house or buying a car. You have to be educated and make sure you know what you're getting, you know, for the contract that you're signing, right? You need to understand what that company is going to do for you. And as you're looking at it, double-check, because I promise you that you're gonna find out you can do all the same stuff for free.

Eric: Right.

Laura: Mm-hmm. Yes.

Eric: All right. Anything else before we move on?

Laura: Yeah. Well, you know, the only thing that I would always say is, you know, don't do anything over the phone, okay? Don't give people your social security number. They're going to be asking for that. Don't give your credit card information. What we did with our one customer, we were able to work within our offices, but we honestly had to, you know, shut down that credit card, right, because we just gave this credit card information to somebody. You know, and you worry about ID theft and that. So, please, you know, if you don't know these people, and you're just talking to them on the phone and that, please, you know, keep your information to yourself on that. You don't want to get into worrying about identity theft or anything.

Eric: Yeah. So, it goes beyond just, like, trying to steal 200 bucks from you and a monthly fee. They could potentially also be stealing your identity and then a lot worse things could then start happening.

Laura: A lot worse things can happen on that. So, yeah, you know, like we always say. And sometimes we know it in the back of our mind, but sometimes we forget, right? And like I said, these scam artists, they're crafty, they're good at what they do. They love getting you on that hook, or love having you have that pain, right? They're gonna hit a pain level for you, that you just think you're talking to your best friend. They're not your friends. I promise you.

Eric: Right. Okay. So, let's talk about the alternative. So, if you have a pain point, because maybe you have too many outstanding loans, maybe you're in default, or you're just in over your head, what do you do?

Laura: What do you do? That's a great question. What I would always advise my customers to do is, especially for your federal loans, okay, if they have defaulted, there are still ways to make good on that loan. The federal government is very good at trying to help you resolve this default. Even if you defaulted five years ago, they are going to still have your records, because I promise you that at some point, for federal loans, the government will start either attaching some type of penalty to your wages. They can take wages from you, or they can take your income tax return. But if you do call them and try to set up some type of monthly payment agreement, you can always rehabilitate the loan.

So, first step that a customer or a borrower should do, especially if they have federal loans involved within their student debt is they should go to studentaid.gov. Okay? That is the Department of Education, and that is where you're going to be able to find information about student loans. There's going to be a section that is manage my loans, and it's a great section for you. Under the manage the loans, what you can do there is if your loan is in default, you can click a button and it's going to give you direct contact to that area, to help you work on your default.

If you are, you know, going through repayment and let's say you want to possibly look at getting your payments reduced because of your income, there's calculators there, again, for free. There's also information about loan forgiveness. It will tell you how you qualify to get loan forgiveness. Again, that is all going to be free for you to be able to use. So, everything that scam artist just kind of told you that he's going to do for you, I think that you will find it on the studentaid.gov. That those resources are right there for you, free of charge.

Also, if you do have private loans, you know, check with your lender directly, if you are having problems or anything. They will be able to also, you know, give you great resources. One of the things that I pride myself on, being with First United, is that I like being able to help people. I like being able to, you know, give them that truthful moment. When that customer called and he said I think I did something dumb, I said, "Yeah, that wasn't the smartest thing you did." But the second [inaudible 00:21:00] but he did get smart when he did call me, like I said. You know, we will help you, as much as we can, navigate that.

Eric: Right. Good deal. Any other advice that you can give, any final thoughts before we move on?

Laura: Thoughts, I would always say, you know, if you think you've been involved in a student loan scam, or you have questions about it, the federal government has a Consumer Financial Protection Bureau. It's the CFPB. And what that is is it is an area where you can go as a consumer, right, and you are able to go ahead and report these things. If you go on to the, it's consumerfinance.gov, you can go in and file a report. You will also find interesting articles in that about student loan scams. CFPB had a lawsuit probably about two years ago, where they collected over $1.7 million from a student loan scammer for unethical practices. So, there is help out there for you, especially with a student loan scam. You know, if you're listening to me now and you're saying, "Oh my gosh, I did something like this two years ago and I've never been able to get out of it," let somebody know, let the Consumer Financial Protection Bureau know about that. They really are here to protect everybody's interest, you know, on that.

Eric: Excellent. Well, and that seems like a good resource too, just if you're curious, like, does this seem like a scam? You can go look it up, almost like Snopes, like finding out if something is true or not, you can go find if that's a scam.

Laura: Exactly. My customer called, yep, and when he sent me over the contract, what's the first thing I do? I Google everything. I Googled that company, right? And then you kind of go into news and you kind of go into it, but then you start seeing people, either there's a forum for that company and things like that. But if it sounds too good to be true, Eric, at the end of the day, guess what? It probably is.

Eric: That's probably the most appropriate advice, right?

Laura: Yes.

Eric: It's the best life advice there is.

Laura: Best life advice, like, go with your gut. If, you know, your gut's telling you no, you gotta trust that sometimes. And again, like we had said, take a day to review everything. Don't do anything immediately. Have them follow up with it. And if you do do that, always please feel free to send it over to me. I would love to be able to see what other companies are doing, because until you connect, until somebody actually shares with me, Eric, I really don't know, right? We really don't know what's going on, but...

Eric: Yeah. Right. Because there's going to be new scams every day out there.

Laura: Right. And then as I looked at that one contract, my blood pressure was going up with every bullet point. I was like, wow. But like I said, always, if you're able to get anything, go to a financial advisor, go to your nearest First United, if you're close to one of our offices. We'd be happy to kind of look at that. You know, and it's all to protect you, to protect your finances and also to protect your identity, right, like we were talking about. It's kind of scary when you get people out there having your credit card information and everything.

Eric: Exactly. Exactly. Laura Helmich, business development officer, and our student loan specialist here at First United. Thank you so much for joining me today. I appreciate your time. And you mentioned, you know, if someone has a question, they can reach out to you. How can they get ahold of you?

Laura: Yes. They can get in touch with me at my direct office number, and that's going to be 301-533-2333. And also within our website, within the mybank.com. If you go to mybank.com/students, that is our student loan page, but within that page, there is my contact and email information. So, always happy to help with anything that you may have in regards to that.

Eric: Excellent. Laura, thank you again so much. I really appreciate you joining me for second episode in a row.

Laura: You're welcome, Eric. My pleasure.

Eric: All right. Look forward to having you again. That brings us to the end of our show. You can always find more episodes by visiting mybank.com/podcast or find us on your favorite podcast app. And you can also leave feedback, ask questions, or request a topic for us to discuss by sending an email to podcast@mybank.com. Thanks for listening. We'll be back next week with more helpful content, but until then, we wish you the best in focusing on what matters most to you.

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