Student Loan Scams: Voicemail Edition

October 29, 2019

Robocalls. They’ve become so common and irritating that we rarely answer our phones if we don’t recognize the number. The voice messages these scammers leave range from humorous to threatening – from the “local police” waiting to take you into custody, to a stranger offering cash for your home.

A recent string of messages hits particularly close to home for the 45 million U.S. borrowers who owe $1.5 trillion in student loans. These calls claim changes to federal student loans or advertise offers of forgiveness of student loan debt. Some people who find these messages in their voicemail don’t even have student loans. But for the 45 million Americans who do, the offers can be a little too tempting. Student loan debt is a burden that we want to find a way out of and sometimes, what sounds to be too good to be true is in fact that. So much so, that we’re willing to put on earmuffs when it comes to a quick way out.

These scammers are after social security numbers, credit card numbers, federal student aid IDs, or for a victim to contribute money to a loan assistance program that (surprise, surprise) has no intention of helping you with your student loans. A reputable company will never ask for any of these things over a voicemail or on the phone.

So how are borrowers supposed to know what offers to be wary of? Let’s run down a list of common tactics for student loan voicemail scams.

Student Loan Scam Tactic #1: They Offer to Abolish Your Student Loans

This tactic is just what it sounds like: fraudsters offering to completely do away with your student loan debt. The scam is tricky because there are federal loan forgiveness programs that pay the balance of your loan under certain circumstances, like if you join the military or qualify and meet the requirements of the Public Service Loan Forgiveness (PSLF) program. We’ve outlined how the PSLF program works in a previous blog post.

The offer from the scammer usually sounds something like, “we’ll release your student loans for a nominal, upfront fee.” The red flag is the advance payment – something legitimate organizations would never do. It’s actually illegal for companies to make you pay before helping you. This claim is even more suspicious when they offer “quick” student loan forgiveness. In actuality, the Public Service Loan Forgiveness program takes years to complete and includes detailed requirements for qualifying. To put it simply, if you have student loan debt, you must repay that debt. If you are having a challenge repaying your student loans, contact your lender or a reputable resource focused on assisting people in your situation.

Student Loan Scam Tactic #2: They Offer “Exclusive” Access

Some voicemails promote programs for reducing student loan monthly payments or even your total balance as part of an exclusive offer. However, companies who have your real best interest at heart would never make promises or offers without first knowing your personal financial situation.

Student Loan Scam Tactic #3: They Convince You to Act Quickly

These student loan voicemail scams work by telling you to call back “right away” or risk losing your offer. But you should never be pressured into an offer. You student loans will remain subject to your existing agreements with your student loan lender unless you take action to change them, such as by refinancing your student loans with a new lender. Don’t feel pressured to make a choice now. A company can only propose different rates or terms based on your applying for a new program. Take your time and do your research on who is making the offer and determine if they are a reputable organization with experience in student loans and student loan refinancing.

Student Loan Scam Tactic #4: They Use Political Buzz For Power

For borrowers with federal student loans, scammers sometimes claim transitions in presidential administrations have ushered in changes to student loan laws, for example, the switch from the Obama to the Trump administration. Scammers get fuel from the fact that many politicians are currently talking about student loan debt. They believe borrowers will get confused between the different proposals and plans and assume they’ve heard of the offer. Once you’ve given them your data, they have all they need.

Student Loan Scam Tactic #5: They Tell You That You Can’t Do It Without Them

This is the classic scammer line: you need me or else you will miss out on this great opportunity. We hate to break it to those scammers, but there’s nothing that they offer that you can’t do on your own – for free. You can explore lowering your student loan interest rate, negotiate new loan repayment terms, and even try to qualify for PSLF all on your own, without paying a company to assist you.

How Do You Avoid These Scams?

Now that you know what phony offers are out there, there’s one simple way you can avoid scammers: don’t answer the phone and don’t call them back.

If you do answer the phone—and realize it’s a robocall—hang up and don’t push any buttons or engage in conversation. This is one situation where you should push manners to the side and get off the line as quickly as possible.
Do your research into who is calling you and reach back out to them through the official phone number from their website if necessary.
Remember, anyone can build a website. Make sure you validate a student loan company is authentic by looking for indicators, such as sufficient user reviews on reputable sites and a listing on the Better Business Bureau.

The U.S. Department of Education has outlined steps you can take to avoid student loan scams and listed companies they’ve taken action against.

If you’re looking to consolidate or refinance your student loans for a potentially lower interest rate or new repayment terms, the team at ELFI* can walk you through the entire process and help you decide if it’s right for you.

*Subject to credit approval. Terms and conditions apply.

NOTICE: Third-Party Web Sites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

Tuition

Average Cost: $10,440 (public) | $36,880 (private)*

Tuition is the amount you pay your university to enroll in classes. The total changes based on the number of credit hours you take and if you take courses with additional charges like science labs or residential academic programs that let you attend smaller classes in your dorm. Offers like the Western Undergraduate Exchange (WUE) can help students save money by providing in-state tuition to out-of-state students. Despite programs like this, the average cost of college is always rising because tuition increases each year based on inflation, school budgets, and a variety of other factors. Mandatory fees are lumped into tuition and include contributions toward campus construction and access to things like:

Student rec center
Athletic events
Career services
Student activities
Computer labs
Bus passes
Etc.

Room and Board

Average Cost: $11,510 (public) | $12,000 (private)*

Many colleges require you to live on-campus for at least your first year of attendance. The benefit of this requirement is that you’re close to classes and resources, including dining halls and bodegas that can be paid for with your room and board fees. These costs aren’t typically part of the bill for community colleges or schools with a high population of daily commuters. However, students will still need to cover living expenses like rent, utilities, and groceries if they chose not to live at home with their parents and amounts vary based on eating habits and geographic locations. For example, rent in California is higher than in Tennessee and the general cost of living in an urban setting is higher than it is at a rural school.

Books

Average Cost: $1,240 (public and private)*

Books can be a secret killer when it comes to college expenses. No one ever anticipates the sticker shock associated with their first $300 textbook. These costs also include necessary technology like tablets or laptops for note-taking and essay writing. It also can include special supplies like graphite pencils and drawing paper for art majors or scrubs or stethoscopes for nursing majors. These semesterly shopping trips can do real damage to your checking account and add to the average cost of college.

Transportation

Average Cost: $1,230 (public) | $1,060 (private)*

So far, we’ve focused on what you’ll need to pay to get by on campus, but we haven’t talked about the expenses associated with getting to campus. These costs impact resident and commuter students and range from airplane tickets and bus fare to parking passes and tanks of gas.

Financial Aid

When factoring the average cost of college, the other side of the ledger is represented by financial aid in the form of scholarships and need-based grants. With these awards, that don’t have to be repaid, the cost of tuition is reduced. In addition to scholarships and grants, federal and private loans are available to help cover the cost of college. Private lenders offer student loan options for undergraduate students, graduate students, and even parents. Loans cover everything from tuition to personal expenses that you’ll occur during your college years, like cell phone bills, clothes, laundry, or even a bed for your apartment. The biggest thing to keep in mind when taking out loans is to borrow only what you’ll need. It’s necessary to have money to pay bills while you’re a full-time student, but borrowing too much can put you in a bind when it comes time to pay back those loans.

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

2019-11-15

The Importance of a Good Debt to Income (DTI) Ratio

It is evident to most people that having more income and less debt is good for their finances. If you have too much debt compared to income, any shock to your income level could mean you end up with unsustainable levels of debt. Every month you have money coming in (your salary plus additional income) and money going out (your expenses). Your expenses include your recurring bills for electricity, your cell phone, the internet, etc. There are also regular amounts that you spend on necessities, such as groceries or transportation. On top of all of this, there’s the money you spend to service any debts that you may have. These debts could include your mortgage, rent, car loan, and any student loans, personal loans, or credit card debt.

What is the Debt-to-Income Ratio (DTI)?

The Debt-to-Income Ratio (DTI) lets you see how your total monthly debt relates to your gross monthly income. Your gross monthly income is your total income from all sources before taxes and other deductions are taken out. Below is the formula for calculating your DTI:

DTI = (Total of your monthly debt payments/your gross monthly income) x 100

Example: Let’s suppose the following. Your gross monthly income is $5,000, and you pay $1,500 a month to cover your mortgage, plus $350 a month for your student loans, and you have no other debt. Your total monthly payments to cover your debts amounts to $1,850.

Your DTI is (1,850/5,000) x 100 = 37%

Here’s a handy calculator to work out your DTI.

Why is Your DTI Important?

Your DTI is an important number to keep an eye on because it tells you whether your financial situation is good or if it is precarious. If your DTI is high, 60% for example, any blow to your income will leave you struggling to pay down your debt. If you are hit with some unexpected expenses (e.g., medical bills or your car needs expensive repairs), it will be harder for you to keep on top of your debt payments than if your DTI was only 25%.

DTI and Your Credit Risk

DTI is typically used within the lending industry. If you apply for a loan, a lender will look at your DTI as an important measure of risk. If you have a high DTI, you will be regarded as more likely to default on a loan. If you apply for a mortgage, your DTI will be calculated as part of the underwriting process. Usually, 43% is the highest DTI you can have and likely receive a Qualified Mortgage. (A Qualified Mortgage is a preferred type of mortgage because it comes with more protections for the borrower, e.g., limits on fees.)

So, What is a Good DTI?

If 43% is the top level DTI necessary to obtain a Qualified Mortgage, what is a “good” DTI? According to NerdWallet, a DTI of 20% or below is low. A DTI of 40% or more is an indication of financial stress. So, a good rule of thumb is that a good DTI should be between these two figures, and the lower, the better.

The DTI Bottom Line

Your DTI is an essential measure of your financial security. The higher the number, the less likely it is that you’ll be unable to pay down your debt. If there are months when it seems that all your money is going toward debt payments, then your DTI is probably too high. With a low DTI, you will be able to weather any financial storms and maybe even take some risks. For example, if you want to take a job in a field you’ve always dreamed about but are hesitating because it pays less, it will be easier to adjust to a lower income. Plus, debt equals stress. The higher your DTI, the more you can begin to feel that you’re working just to pay off your creditors, and no one wants that.

DTI and Student Loan Refinancing

Your DTI is one of several factors that lenders look at if you apply to refinance your student loans. They may also assess your credit history, employment record, and savings. Refinancing your student loans may actually decrease your DTI by lowering your monthly student loan payment. This may help you, for example, if you want to apply for a mortgage. ELFI can help you figure out what your DTI is and if you are a good candidate for student loan refinancing. Give us a call today at 1.844.601.ELFI.

Learn More About Student Loan Refinancing

Terms and conditions apply. Subject to credit approval. NOTICE: Third Party Web Sites Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.

2019-11-11

Avoiding Identity Theft: Student Loans Edition

Identity theft seems like something that will never happen to you, that is, until it does. And when it hits, it can cause a lot of trouble—impacting your bank accounts, credit report, taking out loans and requiring a lot of time and effort to correct. When a thief has access to your personal information, there’s no limit to the havoc they can wreak. While charges on credit cards and unauthorized bank account withdrawals are more commonly associated with identity theft, student loan fraud can happen as well. Most people know to take necessary precautions, like shredding important documents and having facial ID or passcode set on their phone, but it seems like these steps are never enough. Identity thieves can get to your information through data breaches, stolen mail, stolen wallets, email scams, and even though your internet connection. Without altogether avoiding technology or living in a vault, how cautious do you need to be? Very cautious, as it turns out. Let’s look at how to avoid identity theft, then what to do if the theft involves unauthorized student loans.

Avoiding Student Loan Identity Theft

Use Safe Internet Connections When you Cyber Monday shop in a cafe or buy Wi-Fi at 30,000 feet, you put yourself at risk for identity theft. Public Wi-Fi connections are full of fellow internet surfers, and they don’t all have good intentions. Though convenient, public Wi-Fi may not have the proper security and encryption measures in place. When a fraudster gains access to your personal information via public Wi-Fi, it’s known as a man-in-the-middle (MITM) attack. Once they’ve gained access, thieves can spy on your internet behavior and steal usernames, passwords, credit card numbers, etc. Needless to say, it’s best to avoid anything on a public network that requires you to log into accounts or make purchases. This includes applying for colleges and student loans. Be sure you’re always working from a safe, trusted internet connection and make sure your device or computer has the latest software installed. Don’t Keep Your Social Security Card in Your Wallet At some point, you’ll likely be asked to share your Social Security number at the doctor’s office, your bank, the Department of Motor Vehicles, or even your job. And because of that, it’s tempting to keep your Social Security card in your purse or wallet for easy access, but doing so can open the door to identity theft. When your SSN lives next to your credit cards and driver’s license, you give thieves everything they need to steal your identity. Instead, keep your Social Security card with other important documents in a personal safe at your house or in a rented safe deposit box at a bank or credit union. Read more about when you should and shouldn’t give out your Social Security number. Be Weary About Who You Share Information With When applying for student loans, work directly through fafsa.gov for federal loans or through reputable financial institutions for private loans. How can you tell if a site is reputable? You should be able to easily find contact information on their website and speak to a real person when you call. Reputable websites also work through encrypted connections, helping reduce the risk of identity theft by sending your data across the internet with additional layers of protection. You can tell if a website is encrypted by its web address: “HTTP” sites are not encrypted while “HTTPS” sites are. If you do find that your identity has been used to take out unauthorized student loans, the below tips can help you get back on track. Recovering from Student Loan Identity Theft If you received a call or letter from a loan servicer warning that your account is past due, despite not having a student loan with that institution, you might be the victim of identity theft. Student loan identity theft might also be discovered during a routine credit check or by a credit monitoring service. Regardless of how you find out, once you do, here’s who to contact:

Contact the lenders that opened the accounts. Their fraud departments can freeze the accounts to prevent any further damage.
Contact the Federal Trade Commission (FTC) to complete an Identity Theft Report. This report will provide a detailed recovery plan and layout the appropriate steps. It will also pre-fill forms and letters you’ll need, saving you precious time.
Contact the police and file a police report. A police report may be needed to help clear things up with lenders, credit agencies or the Department of Education.
Contact the school where the fraudulent account was opened, notify them of your incident and ask for a letter stating that the account is closed.
Contact the three major credit reporting agencies (Equifax®, Experian®, and TransUnion®) and have them place a free fraud alert on your credit report. Doing so lets each one know to take extra precaution before approving new lines of credit. You may also consider a credit freeze, which prevents any new lines of credit from opening until you have it lifted.

Keep An Eye On Things If you haven’t signed up for a credit monitoring service, now is the time. The big three reporting agencies offer these services, as do third-party platforms like Credit Karma®. You can set up alerts to be notified of any new activity tied to your personal information. If you don’t want to sign up for a service, at least do your due diligence by checking your credit frequently. You can get your credit report at no cost every 12 months from each of the main credit bureaus (Equifax, Experian, and TransUnion). Request your report at AnnualCreditReport.com. Remember, fraudsters will stop at nothing to access your personal information, and they’re good at what they do! It’s troublesome to have any aspect of life tampered with, but especially so when it comes to student loan identity theft. It pays to know ways to help protect yourself, and if the unfortunate does happen, how to begin the rebuilding process.